Sharp Convertible Bonds Jump to Eight-Month High on Samsung Deal

Sharp Corp.’s bonds rose to the highest level in eight months after Samsung Electronics Co.’s investment spurred optimism the deal will help the Japanese television maker pay be debt due in September.

The Osaka-based company’s zero-coupon convertible notes climbed to 91 yen per 100 yen face value as of 2:41 p.m. in Tokyo, according to Tokyo Stock Exchange. That’s the highest since Aug. 2, when Sharp raised its annual deficit outlook eightfold.

Samsung, which is focusing on higher-end sets using OLED technology to maintain its dominance of the flat-panel television market, is paying 10.4 billion yen ($111 million) for a 3 percent stake in Sharp to secure supply of liquid-crystal screens for its smartphones and televisions. The deal comes at a time when five continuous quarterly losses sapped cash reserves at Japan’s largest display maker to less than the 200 billion yen in debt it has maturing Sept. 30.

“We expect this to be a trigger for further investment from someone else,” Mana Nakazora, chief credit analyst at BNP Paribas Securities Japan in Tokyo, said in a telephone interview from Tokyo. “The infusion itself is too small to be meaningful, unless it leads to something more.”

Samsung is paying 290 yen a share for the stake, or 15 percent less than the Japanese company’s closing price yesterday, and plans to close the sale on March 28, according to a filing with Japan’s Finance Ministry yesterday. Sharp traded 6.7 percent lower at 318 yen as of 2:05 p.m. in Tokyo.

Foxconn Deal

Sharp is also seeking an investment from Taiwan’s Foxconn Technology Group. Foxconn, founded by billionaire Terry Gou, initially agreed in March 2012 to buy a 9.9 percent stake for 550 yen a share. The deal floundered after Sharp (6753)’s shares plunged for seven straight months, reaching last year’s low of 143 yen on Oct. 17.

The talks may conclude on March 26 without an agreement, two people familiar with the discussions said last month, declining to be identified because the details are private.

Sharp increased its net loss forecast 250 billion yen for the fiscal year ending March 31, from 30 billion yen estimated earlier, according to its on Aug. 2 statement. The company further raised the annual shortfall outlook to 450 billion yen in November and warned there was “material doubt” about its ability to survive.

To contact the reporter on this story: Yusuke Miyazawa in Tokyo at ymiyazawa3@bloomberg.net

To contact the editor responsible for this story: Shelley Smith at ssmith118@bloomberg.net

Bloomberg reserves the right to edit or remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.