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Sharp asks banks, turnaround fund for help

By Reuters
Tokyo, 06 Mar 2015

Loss-making Sharp has asked a domestic corporate turnaround fund to invest up to $250 million in capital ? aid which would come on top of plans to tap its two main lenders for a second major bailout, the Nikkei business daily reported.

Hit by a supply glut of smartphone screens in China and fierce competition from rival Japan Display that derailed efforts at a recovery, Sharp has warned of its third annual net loss in four years and is working on a fresh plan to overhaul its businesses.

Sharp CEO Kozo Takahashi met with officials from Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ on Thursday, although he did not request specific amounts or make promises about restructuring, sources familiar with their exchange said.

The Nikkei said the embattled electronics manufacturer has also reached out to Japan Industrial Solutions to take a stake worth up to 30 billion yen. The turnaround fund is backed by several financial institutions, including Mizuho and Bank of Tokyo-Mitsubishi, as well as the state-backed Development Bank of Japan.

The fund would purchase preferred or common shares in Sharp, the Nikkei said, adding Sharp hopes to receive the investment by March next year.

A spokesperson for Sharp declined to comment on the report, saying only that nothing had been decided and it was working on restructuring plans that are due to be announced in May. A spokesperson for Japan Industrial Solutions declined to comment.

Financial sources have said banks want Sharp to embark on a bold restructuring, similar to recent efforts from Panasonic and Sony, which are showing signs of a turnaround.

But they are also expected to avoid pursuing too tough a stance for fear of triggering a collapse of the 100-year-old maker of TVs and high-end panel displays.

Bankers have said a debt-for-equity swap ? writing off their loans in return for ownership of Sharp ? would be a logical option for any new rescue.

The Nikkei has put the potential value of a debt-for-equity exchange at around 150 billion yen ($1.3 billion) and has also said the company may reach out to other electronics makers such as Samsung, which has a stake of around 2%.

Company sources say Sharp's management is not willing to consider more radical options such as merging its display business with rival Japan Display, a reluctance some analysts say is due to pride.

Japan Industrial Solutions' portfolio includes Unitika, which makes advanced textiles and plastics, and silicon wafer supplier Sumco. Successful exits include Spa Resort Hawaiians, a resort in Fukushima that saw attendance slide in the wake of the 2011 earthquake.

The banks agreed in September 2012 to rescue Sharp with loans and credit lines worth 360 billion yen, or $3 billion at today's exchange rates, in exchange for promises to return to the black by this year. Sharp exited the European TV market and closed solar-panel businesses in Europe and the United States.

Sharp shares rose 0.9% by midday, in line with the benchmark Nikkei average. They have fallen around 12% so far this year.

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