Firm backing Foxconn is worth $1B

Payments to county, city are guaranteed by SIO

SIO International Holdings Ltd., the company guaranteeing payments to Racine County and Mount Pleasant as they issue debt for the Foxconn Technology Group project, has a net worth of roughly $1 billion, an analysis by the Wisconsin Economic Development Corp. shows.

The analysis supports the view of local officials that the guarantor has the financial muscle to stand behind the promises Foxconn is making as it prepares to build an enormous manufacturing complex supported by extensive local aid.

Both the village and county boards this week unanimously approved a development agreement that calls for local spending of $764 million to help Foxconn build what it says will be a $10 billion flat-screen plant in Mount Pleasant employing up to 13,000 people.

The state has agreed to provide another $3 billion to Foxconn.

That aid will come after Foxconn starts building its complex and hiring people, and will be based on the actual amount invested and number of jobs created.

Much of the local spending, on the other hand, will come up front, as the county and village borrow money to buy land, build roads and run things like sewer and water lines to Foxconn.

The municipal debt could top $300

million by the middle of next year — before the expected Foxconn developments begin generating the new taxes that are expected eventually to repay all the local spending.

The state has committed to backstop up to 40% of the municipal borrowing, but that still could leave the village and county with around $200 million in initial exposure.

To mitigate that, local negotiators obtained a guarantee from SIO securing up to $135 million in Foxconn’s obligations to the village and county.

Owned 89% by Foxconn Chairman Terry Gou, SIO appears to have deep pockets.

The great majority of its net worth of $1 billion comes from the company’s holdings in two Japanese companies affiliated with Foxconn — Sakai Display Products Corp. and Sharp Corp. — a review by the WEDC staff found. The stake in publicly traded Sharp alone is worth $642 million, providing “considerable liquidity value if needed,” the review said.

SIO lost $216 million in 2016, but that stemmed from one-time expenses not expected to be repeated in the future, the review said.

SIO also is a guarantor of Foxconn’s obligations to the state, David DeGroot, Mount Pleasant village president, noted Wednesday. DeGroot said he has “absolute confidence” in SIO’s financial strength.

Besides the pledge from SIO, the development agreement calls for Foxconn, by Dec. 15, to put $60 million into an account that the village and county will use to buy land for potential expansion of the project.

The village also will hold first-priority liens on land it buys and turns over to Foxconn to build its plant.

SIO International Holdings is 89% owned by Foxconn Chairman Terry Gou.