TOKYO (Reuters) - Japan's Renesas Electronics Corp is asking major shareholders to provide loan guarantees after they balked at a plan to inject fresh capital, the Mainichi newspaper reported, tempering fears over the chipmaker's future.
Shares of Renesas, the world's fifth-largest chipmaker, spiked nearly 20 percent on the news as investors took comfort that the alternative proposal would keep Renesas afloat, forcing short-sellers who had sold down the stock aggressively to cover their positions.
"Investors are relieved to see the report that Renesas is seeking guarantees for its loans as it means that the company has found a solution to shore up its finances," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.
Renesas, a product of successive mergers of the chip divisions of Mitsubishi Electric Corp, Hitachi Ltd and NEC Corp, has been planning to raise more than 100 billion yen ($1.26 billion) in fresh capital and cut at least 12,000 jobs, sources have said.
The company, which is the world's leading supplier of microcontroller chips used in cars, is facing high costs and tough overseas competitors and logged a massive net loss this year after it was forced to shut eight of its factories in the wake of last year's natural disasters in Japan and Thailand.
Hobbled by a strong yen, Renesas is also grappling with losses in its system LSI division, which makes customized chips for a range of electronic devices, including televisions made by Japan's struggling consumer electronics makers.
Sources said last month the firm's turnaround plan would trim its payroll by more than a quarter through the sale of a system chip factory in northern Japan and its Mobile unit, which makes chips for mobile phones.
Renesas president Yasushi Akao visited all three big shareholders personally to present the firm's plan last Friday, according to sources.
The company has said the final turnaround plan would be announced by July.
Macquarie Securities analyst Damian Thong said the prospect of debt-financing was a more positive option for investors who had feared massive dilution of their holdings if the company raised capital via a share issuance.
The major shareholders can support Renesas through a capital raising from a share issue, the issuance of subordinated bonds or by providing a loan guarantee.
The Mainichi report said on Friday that Mitsubishi Electric, Hitachi and NEC had all refused to inject fresh capital.
Renesas spokesman Yoichi Kobayashi said he could not comment on the report or its authenticity, while Mitsubishi Electric and Hitachi also declined to comment.
A source familiar with the matter told Reuters last week Mitsubishi Electric was not considering providing capital support to Renesas at this time.
NEC, which has struggled with steep losses in its mobile handset and IT hardware businesses, was not likely to offer any form of capital support or accept laid-off workers from Renesas, a source told Reuters on Wednesday. Another source said Hitachi would not disclose its stance on the matter.
Renesas shares traded up 16.2 percent to 312 yen by 0335 GMT, compared with a 1.8 percent decline on Tokyo's benchmark Nikkei. The stock is still down more than 30 percent since the end of April.
Additional reporting by Maki Shiraki; Editing by Richard Pullin