TOKYO Japan's Sharp Corp plans to raise up to $1.7 billion as the struggling TV and display maker seeks to pay down debt after a rescue last year and shore up its tattered finances, people with knowledge of the moves told Reuters.
The capital injection would move Sharp forward in its turnaround plan, with one source saying it will tide the company over through the business year ending in March. But doubts remain about whether it can sustain a recent recovery in its core LCD panel business where price competition from China and elsewhere remains fierce.
Sharp also faces a shortfall in its corporate pension plan and will have total unfunded liabilities amounting 120 billion yen ($1.20 billion) at the end of the March business year. The full amount does not need to be funded immediately but it increases the pressure on the embattled electronics maker to raise capital.
The sources said the Osaka-based company, which supplies display panels for Apple Inc's smartphones, aims to raise as much as 150 billion yen through a public share offering. And it may raise an additional 20 billion yen in a third-party share allocation, according to a financing plan that has been shared with creditors.
Sharp's stock price slumped 6 percent by mid-morning on Thursday to a 2 1/2-month low of 363 yen on the capital-raising news, as the public offering would dilute existing shareholders.
The company last year posted a 545 billion yen net loss, which pushed its capital below 6 percent of equity, well short of the 20 percent ratio widely seen as a financial-stability threshold for manufacturers.
It received a 360 billion yen rescue from banks last year and has since received investments from Samsung Electronics Co Ltd and Qualcomm Inc, two of its major clients.
Sharp is expected to decide on its next capital-raising steps at a board meeting scheduled as early as next week, according to the sources who asked not to be identified. The company had no immediate comment.
The third-party share placement would be made to companies that have deep business ties to Sharp, including Lixil Group, Makita Corp and Denso Corp, according to the sources.
Sharp has been working for months with its main banks on plans to increase its capital relative to its debt, and has said it is considering a wide range of options.
The company expects to post a fourth consecutive quarterly operating profit in the three months through in September.
Talks with Samsung about an expanded business tie-up and additional investment broke down last month, people with knowledge of the discussions have said.
(Additional reporting by Emi Emoto and Mari Saito; Writing by William Mallard; Editing by Stephen Coates)