By Junko Fujita
TOKYO May 21 A group of Elpida Memory
bondholders opposes Micron Technology's offer to buy the
bankrupt Japanese chipmaker and has reached out to South Korea's
SK hynix and U.S.-based GlobalFoundries to ready a
potential alternative plan, a source with direct knowledge of
the matter said.
SK hynix, which had dropped out during the second and final
round of bidding for Elpida, is interested in the memory
chipmaker's Taipei operations, while GlobalFoundries is
interested in its Hiroshima operations, said the source, who
asked not to be identified.
Although the talks are still very preliminary, if SK hynix
and GlobalFoundries agree to pay a price that satisfies
bondholders, the group may file a rival restructuring plan for
Elpida to the Tokyo district court in hopes of starting a new
round of bidding, the person said.
The submission of an alternative plan, which is highly
unusual in bankruptcy cases in Japan, would require the approval
of the court before it could be put to a vote of Elpida's debt
holders, including its banks.
"Bondholders don't want to see Elpida's estate lose value to
Micron, so there are talks ongoing with other industry players
for the possible sale of Elpida's businesses in separate
transactions," said the person.
"The two sales might just produce more than what could be
achieved from a single sale to a single buyer."
A Seoul-based spokesman for SK hynix said the company was
not in talks with the debt holders.
The bond holders' action comes as foreign high-yield debt
investors have become more willing to look for opportunities in
Japan's corporate distressed bonds at a time of low defaults in
the United States.
"The problem with buying distressed bonds in Japan is that
the system does not typically use a debt-to-equity swap, which
is the norm in the U.S. system," said Kevin Starke, a senior
analyst at CRT Capital Group in Connecticut.
Converting bond debt to equity makes it easier to value a
distressed company, he said.
In Japan most in-court restructurings use the sponsor
method, where a third party invests new capital in the failed
company. It is difficult to estimate the relationship between
how much the sponsor invests and how much the old bondholder can
U.S.-based Micron won the right to negotiate exclusively to
buy Elpida, Japan's sole maker of dynamic random-access memory
(DRAM) chips, with a bid that a source with direct knowledge of
the deal said was worth 200 billion yen ($2.5 billion).
Elpida, which is trying to stay in business after failing in
February with 448 billion yen in liabilities, Japan's biggest
ever bankruptcy by a manufacturer, chose Micron as its preferred
investor early this month.
TPG Capital LP and China's Hony Capital also
presented a joint bid in the final round of bidding.
The group of bondholders had said a Micron proposal reported
in Japanese media before the final round of bidding worth 150
billion yen was too low. The bondholders did not identify
themselves in a filing to a U.S. court.