Sharp Nears Deal With Lenders on Debt-for-Equity Swap

More tech fallout, sharp cutting people may be a prospect. Aivars Lode avantce

Sharp Nears Deal With Lenders on Debt-for-Equity Swap

Company to cut 5,000 jobs, trim troubled operations while banks write off some $1.68 billion

By Takashi Mochizuki 

April 17, 2015 4:37 a.m. ET 

TOKYO—Sharp Corp. is nearing an agreement with its main banks on a restructuring plan that would include job losses, cost cuts and ¥200 billion ($1.68 billion) in financial support from the banks, people familiar with the matter said.

Osaka-based Sharp said Friday it would announce its midterm business plan on May 14, along with results for the year ended March 31. Analysts say it is likely Sharp lost ¥200 billion or more in the just-ended fiscal year, battered by competition in its core business of making liquid-crystal displays for smartphones and televisions.

In a statement, Sharp said it’s studying a structural overhaul and talking with its banks, but that nothing has been decided yet.

The people familiar with Sharp’s plan said the company aims to cut 3,000 jobs in Japan and 2,000 overseas, while trimming troubled operations making solar panels and television sets. The company is also ready to sell its headquarters, they said. Sharp’s lenders, led by the core banking units of Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc., are ready to write off about ¥200 billion in loans in exchange for Sharp shares, they said.

The debt-for-equity swap would mark the second big bailout of Sharp in less than three years.

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Still undecided is the fate of Sharp’s LCD business, which has fallen behind domestic rival Japan Display Inc. as well as South Korean suppliers. The people familiar with the talks said Sharp is continuing to study a spinoff of the LCD business and an alliance with other parties, but that any resolution may take some time.

Sharp shares fell ¥16, or 5.8%, to ¥261 in Friday trading in Tokyo after reports of the possible deal with banks circulated.

People familiar with the matter said Sharp might be willing to cede a stake in its LCD business to the government-backed Innovation Network Corp. of Japan, which already holds 36% of Japan Display, but they said a sticking point is Sharp’s desire to retain control of the business.

Many of Japan’s leading electronics companies, including Panasonic Corp. and Hitachi Ltd., have posted stronger results recently, thanks to decisive restructuring of money-losing consumer businesses and growth in businesses serving other businesses such as car-parts manufacturing. Sharp, by contrast, has lurched from crisis to crisis without developing a strong profit center.

Even with a new bailout, “the company has a long road ahead of it for an earnings recovery,” said Deutsche Securities analyst Yasuo Nakane.