* Bondholders seek right to force Elpida into bankruptcy in
* Court hearing in Wilmington, Delaware on Monday
* Elpida currently bankrupt in Japan
* Company plans $2.5 bln sale to rival Micron
By Tom Hals and Nick Brown
Sept 17 Frustrated by Japanese chipmaker Elpida
Memory Inc's plan to sell itself out of bankruptcy in
Tokyo for a perceived pittance, the company's U.S. bondholders
are bringing the fight back home, turning to a Delaware court in
hopes of wresting control of the case.
Holders of some of Elpida's $5.6 billion in bonds will argue
at a hearing on Monday in U.S. Bankruptcy Court in Wilmington,
Del., that Elpida's plan to sell itself to U.S. rival Micron
Technology Inc for about $2.5 billion drastically
undervalues the company.
Elpida in March had filed for so-called Chapter 15
protection in the Delaware court, a common move for companies
restructuring outside of the United States. Chapter 15 allows
U.S. courts to recognize a foreign bankruptcy as the main
proceeding and block creditors from seizing the company's
But in court papers filed ahead of Monday's hearing,
Elpida's bondholders made the unusual demand that Judge
Christopher Sontchi take steps to protect their interests in
Elpida's U.S. assets and declare that bondholders have the right
to force Elpida's American subsidiary into bankruptcy in the
Elpida, the last of Japan's dynamic random access memory, or
DRAM, chipmakers, was driven into bankruptcy in Tokyo District
Court by falling chip sales and foreign competition. In a bid to
raise money to repay creditors, it has agreed to sell its
business to Boise, Idaho-based Micron for $750 million in cash
and $1.75 billion in deferred payments.
Buying Elpida, which supplies Apple Inc, would
boost Micron into the number two spot behind Samsung Electronics
in the global market for DRAM chips.
The bondholders, led by hedge funds Linden Advisors, Owl
Creek Asset Management and Taconic Capital Advisors, have argued
that Elpida is worth 300 billion yen ($3.78 billion), and they
have gone on the offensive against what they see as a sweetheart
deal with Micron.
The bondholders filed a reorganization plan for Elpida with
the Tokyo court. A court-appointed committee is reviewing that
plan, which would maintain Elpida as a standalone company, as
well as the Micron sale plan. The committee is expected to
decide this month whether one, neither or both of the plans will
be sent to creditors for a vote.
In the meantime, the bondholders are stepping up the
pressure in the U.S. Chapter 15 case by asking Sontchi to modify
his April ruling recognizing the Japanese case as the main
Dan Guyder, an attorney at law firm Allen & Overy who
specializes in Chapter 15 bankruptcies, said he had never seen
similar demands made against a foreign debtor and said it would
be a notable development if Sontchi granted bondholders'
Monday's hearing is not the last chance for bondholders. If
the Micron sale is approved in the Tokyo court, Elpida will
likely have to go before Judge Sontchi in Delaware to enforce
the plan, Guyder said, at which time bondholders will have
another shot at attacking the merits of the sale.
Attorneys for Elpida declined interview requests, as did
lawyers for the bondholder group.
FAR FROM DEFERENTIAL
In general, U.S. bankruptcy judges handling Chapter 15 cases
are meant to assist insolvency proceedings in a foreign country.
They are not meant to assess how a restructuring would turn out
in their court.
Chapter 15 has helped Japan Airlines Corp and
German alternative energy company Solar Millennium AG,
among others, overhaul their operations while protecting assets
in the United States.
But far from deferring to the Japanese proceeding, Elpida's
bondholders appear to see the Chapter 15 court as the strongest
forum for making their voices heard.
In court filings in April, the bondholders said Japan
restructuring proceedings lack the transparency of U.S.
bankruptcy practices and do not give creditors as strong a voice
as does the U.S. process.
The argument reflects a preference, relatively common among
bankruptcy creditors, for U.S. bankruptcy courts, where
creditors can form committees and an emphasis is placed on
maximizing creditor payouts.
If the bondholders do have to fight Elpida's plan in
Delaware, they have a recent ruling they can point to as
A U.S. bankruptcy judge in Dallas, Harlin Hale, in June
refused to recognize the Mexican restructuring of glassmaker
Vitro SAB, a decision now being challenged at the
Fifth Circuit Court of Appeals next month in New Orleans.
Elpida's U.S. bondholders have seized on the Vitro decision
as a precedent to challenge the Micron deal.