Sharp likely to seek fresh bank loans after Samsung deal -sources

TOKYO, March 7 Thu Mar 7, 2013 5:00am EST

TOKYO, March 7 (Reuters) - Sharp Corp is likely to seek fresh bank loans to help it repay a $2.1 billion convertible bond due in September, with no further equity deals likely after Samsung Electronics Co agreed to buy a 3 percent stake in the company for $111 million, three sources familiar with the matter said.

"With Samsung, the tie-ups in panels are over. I doubt there will be any more," an executive at Sharp told Reuters on condition that he not be identified, due to the sensitivity of the matter.

The Samsung deal followed an agreement in December for Qualcomm Inc to invest as much as $120 million.

The potential sale of overseas TV assembly plants in Mexico and China could add more to Sharp's available cash but talks for Taiwan's Hon Hai Precision Industry Co Ltd to buy a stake in the company have stalled with a March 26 deadline fast approaching.

Sharp, which in November said it may not be able to survive on its own, is in talks to offload its Chinese TV assembly plant to Lenovo Group Ltd and to sell its Mexico factory to Hon Hai, according to sources familiar with the discussions.

"Without investment from Hon Hai, Sharp will need to raise at least 50 billion yen ($535 million) from the sale of overseas factories and other assets to pay off the bond in September," said Deutsche Securities analyst Yasuo Nakane. The rest of the money would come from cashflow and fresh financing, he added.

The banks that bailed out Sharp in September with $3.9 billion in emergency loans, including Mizuho Financial Group Inc and Mitsubishi UFJ Financial Group Inc, are not including a Hon Hai investment in a business plan they are hammering out for Japan's leading LCD panel maker, sources told Reuters last month.

The next step for Sharp is bank financing, an executive at one of the banks and a separate source at Sharp told Reuters. Fresh loans could total around $1 billion, according to analysts, which would raise the cost of Sharp's bailout to about $5 billion.

Sharp's shareholder equity ratio at the end of 2012 was 9.6 percent, less than half the 20 percent usually considered the minimum for financial health.

To secure its bailout last year, Sharp pledged to cut jobs and sell assets while mortgaging nearly all of its factories and offices in Japan, leaving it with only overseas assets that could be sold to improve its finances.

A junk rating from credit agencies has made raising money in the credit markets expensive for Sharp. Standard & Poor's rates Sharp's debt as B+, a highly speculative grade, while Fitch Ratings has Sharp at B-. Moody's Investors Service withdrew its rating on Sharp in April.

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California state worker Albert Jagow (L) goes over his retirement options with Calpers Retirement Program Specialist JeanAnn Kirkpatrick at the Calpers regional office in Sacramento, California October 21, 2009. Calpers, the largest U.S. public pension fund, manages retirement benefits for more than 1.6 million people, with assets comparable in value to the entire GDP of Israel. The Calpers investment portfolio had a historic drop in value, going from a peak of $250 billion in the fall of 2007 to $167 billion in March 2009, a loss of about a third during that period. It is now around $200 billion. REUTERS/Max Whittaker   (UNITED STATES) - RTXPWOZ

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