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Sharp Said to Pledge Assets to Obtain 360 Billion Yen Loan

Sharp Said to Offer to Collateralize 360 Billion Yen Of Loans
Sharp, reeling from record losses, submitted its cost cutting proposals to its main banks, Mizuho Financial Group and Mitsubishi UFJ Financial, on Sept. 24, two people with knowledge of the matter said earlier this week. Photographer: Tomohiro Ohsumi/Bloomberg

Sharp Corp., the Japanese TV maker cutting more than 10,000 jobs as it tries to return to profit, has offered its assets as security for 360 billion yen ($4.6 billion) of loans, said a person familiar with the matter.

The debt is split equally into a revolving credit facility due in June and a loan that will be syndicated, the person said, asking not to be identified because the details are private. Both loans have a claim on Sharp’s assets and the revolver replaces a 150 billion yen credit arranged last month, the person said. Sharp had previously used a stake in Pioneer Corp. and its company headquarters as collateral for the 150 billion yen loan, Tokyo-based spokeswoman Miyuki Nakayama said by telephone today, declining to confirm whether the new debt had the same terms or replaces the existing facility.

Mizuho Financial Group Inc., Mitsubishi UFJ Financial Group Inc. and Resona Bank Ltd. are lending the funds, along with life insurers and regional banks, the person said.

Sharp, reeling from record losses, submitted cost-cutting proposals to its main banks, Mizuho Financial Group and Mitsubishi UFJ Financial, on Sept. 24, two people with knowledge of the matter said earlier this week. As well as trimming about 18 percent of its workforce, Sharp plans to sell television factories in Mexico, China and Malaysia. It’s negotiating with Foxconn Technology Group to dispose of the plants, those people said.

Sharp cut its stake in Pioneer to 9.2 percent from 14.3 percent and pledged 15 million Pioneer shares each to Mizuho and Bank of Tokyo-Mitsubishi UFJ Ltd. as collateral, according to a Sept. 3 filing to Japan’s Finance Ministry.

Next June

Sharp plans to return to profit next fiscal year with the help of the job cuts and cost reductions, President Takashi Okuda said Sept. 14.

“The June due date for the loan means a lot will depend on the company’s fiscal year earnings results in April-May,” Fumihito Gotoh, head of Japan credit research at UBS AG in Tokyo, said in a telephone interview today. “The company’s promised return to operating profit in the fiscal second half is an important checkpoint.”

Sharp’s shares fell 3.9 percent today to 199 yen in Tokyo, extending their decline this year to 70 percent. The company’s 200 billion yen of convertible bonds due Sept. 30 next year rose 1.5 percent to 69 yen for 100 yen face value.

Selling Recurrent

The company had 706 billion yen of short-term debt maturing within 12 months and 314 billion yen in long-term debts at the end of June, according to its latest quarterly financial statements. Sharp’s cash and near-cash stood at 218 billion yen at the time.

Japan’s biggest maker of liquid-crystal panels has already put up its Osaka headquarters and some factories as debt collateral, Sharp said Sept. 6. Its credit rating has been cut to junk by Standard & Poor’s and Moody’s Investors Service.

The cutting of 10,000 jobs, or about 18 percent of its workforce, and the sale of U.S. solar developer Recurrent Energy LLC were in the plan Sharp presented to its lenders Sept. 24, people familiar with the plan said earlier.

The company agreed in 2010 to buy closely held Recurrent for as much as $305 million in cash. Recurrent installs, owns and operates solar-power systems and sells the generated electricity to utilities, municipalities and businesses.

Solar Cells

Sharp plans to end production and sales of solar cells and modules in the U.S. and Europe by March as part of a restructuring, Kyodo News said. The company plans to sell three manufacturing plants for solar products in Japan’s Nara, Osaka and Toyama prefectures and consolidate production at its Sakai plant, Kyodo reported today, without saying where it got the information.

Sharp is negotiating with Foxconn Technology Group to dispose of the three TV plants in Mexico, China and Malaysia, the people said. The electronics maker has been renegotiating terms for a proposed stake sale to Taipei-based Foxconn after widening its full-year loss forecast eightfold in August, triggering a slide in its share price.

Foxconn agreed in March to invest 67 billion yen for a 9.9 percent stake in Sharp at 550 yen a share.

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