Sharp Is Said to Seek Syndicated Loan After Yen Borrowings

Sharp Said to Be Seeking Syndicated Loan After Yen Borrowings
Sharp Corp. rose the most in more than five months in Tokyo trading yesterday, reversing three consecutive days of declines. Photographer: Yuzuru Yoshikawa/Bloomberg

Sharp Corp., the Japanese electronics maker renegotiating a stake sale to Foxconn Technology Group, is in talks with potential lenders for a syndicated loan, a person with knowledge of the matter said, declining to be identified because the negotiations are private.

Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., Sharp’s two main lenders, provided the company with 210 billion yen ($2.7 billion) of loans during the past two months, according to another person with knowledge of the matter. The Osaka-based company obtained a short-term facility of about 60 billion yen in July and an approximately 150 billion-yen credit last month, the person said.

Sharp, which widened its full-year loss forecast eightfold last month, is seeking to raise cash and cut costs as 706 billion yen of its bonds, commercial paper and borrowings mature within a year. Foxconn’s billionaire founder Terry Gou ended a visit to Japan last week without announcing the conclusion of a deal to invest in Sharp, which is cutting 5,000 jobs after a stronger Japanese currency and slumping global TV demand led to a record loss last fiscal year.

“We cannot comment on the amount of money we borrow from each bank,” Miyuki Nakayama, a Tokyo-based spokeswoman for Sharp, said by phone yesterday when asked about the loans and extra financing. “We believe financial institutions, including our main banks, are considering a lending plan for us.”

Ratings Cut

Sharp rose 2.9 percent to 215 yen as of 12:09 p.m. in Tokyo trading. Shares of the company, Japan’s biggest liquid-crystal display maker, have declined 68 percent this year, the second-biggest percentage loser on the MSCI Asia-Pacific Index.

Standard & Poor’s lowered Sharp’s long-term rating last week by two levels to BB+, the highest non-investment grade, saying the maker of Aquos televisions suffers from deteriorating market conditions and weak cash flow. The rating company also cut Sharp’s short-term rating to B, the highest non-investment grade. It kept the company on a negative ratings watch.

Foxconn Group, through its two Taipei-listed units, Hon Hai Precision Industry Co., the world’s largest contract manufacturer of electronics, and Foxconn Technology Co., a maker of computer cases, agreed in March to buy 9.9 percent of Sharp for 67 billion yen in a sale of new shares.

Selling Holdings

Sharp has tumbled since Foxconn proposed paying 550 yen per share in March, prompting the renegotiations. Foxconn Group plans to proceed with its investment “at the most appropriate time and most appropriate price” because it’s looking at Sharp’s long-term prospects, Gou said Aug. 5.

Hon Hai, maker of Apple Inc.’s iPad and iPhone, is Sharp’s largest supplier, according to data compiled by Bloomberg.

Sharp said last month it may sell stock holdings if Foxconn invests less money than it said in March. Sharp cut its stake in Pioneer Corp. to 9.2 percent from 14.28 percent and pledged 15 million Pioneer shares each to Mizuho Corporate Bank Ltd. and Bank of Tokyo-Mitsubishi UFJ Ltd. as collateral, the panel maker said in a Sept. 3 filing to Japan’s Finance Ministry.

“Terms and conditions of the deal remain uncertain,” S&P said Aug. 31.

The ratings company will continue to monitor the Foxconn alliance talks and may downgrade Sharp further if its prospects for recovery or relationships with credit banks and strategic partners worsen, S&P said.

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