(Corrects headline, 1st and 8th grafs to state that Sharp is likely to seek fresh equity financing, not bank loans)
By Reiji Murai
TOKYO, March 7 (Reuters) - Sharp Corp may sell new shares to help it repay a $2.1 billion convertible bond due in September, after a deal with Samsung Electronics Co raised $111 million in return for a 3 percent stake in the Japanese company, 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 equity financing, an executive at one of the banks and a separate source at Sharp told Reuters. Fresh equity financing could total around $1 billion, according to analysts.
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. ($1 = 93.5200 Japanese yen) (Additional reporting by Taiga Uranaka and Yoshiyuki Osada; Writing by Tim Kelly; Editing by Edmund Klamann)