Sharp Corp. (6753.TO) is considering issuing preferred
securities and subordinate bonds to finance a likely decline in the
amount received from Taiwanese partner Hon Hai Precision Industry
Co.'s (2317.TW) investment in the beleaguered Japanese electronics
company, sources familiar with the matter said Saturday, Kyodo News
reported.
The Hon Hai group, better known as Foxconn, agreed with Sharp in
March to buy a 9.9% stake in the Japanese company by paying Y550
per share. At that price, Sharp was expected to receive around
Y66.9 billion. But its share price has since plummeted after Sharp
reported huge losses, and the two companies are now in talks to
lower the stock sale price.
As of Friday, Sharp shares traded at about Y200 on the Tokyo
bourse -- far below the sale price initially agreed with Hon Hai.
If Hon Hai invests in Sharp at its recent prices, proceeds from it
will fall short of the initially expected amount by about Y40
billion.
To make up for the difference, Sharp is also mulling selling to
Hon Hai some overseas factories producing liquid crystal display
televisions, the sources said. Subject to the potential sale to the
Taiwanese firm are believed to be TV assembly plants in Mexico,
Poland, China and Malaysia. Sharp expects the plant sales to also
reduce overhead costs, they said.
Sharp is moving to issue preferred securities and subordinate
bonds to close business partners instead of floating corporate
bonds, on which it would have to pay a relatively high interest
rate given the downgrading earlier this year by major ratings
agencies of its credit rating due to its deteriorating business
performance.
Sharp is planning to make a decision on the securities issuance
and asset sale plans by the end of September, the sources said.
Sharp needs to shore up its balance sheet after its
interest-bearing debts ballooned to around Y1.25 trillion as of
June 30. In September 2013, the company will also have to repay
around Y200 billion that it raised through a convertible bond
issue.
Subscribe to WSJ: http://online.wsj.com?mod=djnwires