Elpida to seek delayed rehabilitation deadline

Kyodo

Struggling semiconductor maker Elpida Memory Inc. may ask the government to extend the March 31 deadline of its rehabilitation program by three months.

Sources said Thursday that Elpida, Japan’s sole manufacturer of dynamic random access memory chips, apparently has judged it difficult to compile rehabilitation plans by the deadline, which is stipulated by the program aimed at helping cash-strapped companies through such measures as preferential tax and accounting treatment.

Elpida also said Thursday that it will reduce its capital by ¥150 billion to cover dividend payments and buy back preferred shares from the Development Bank of Japan.

Elpida’s business performance has deteriorated due to the strong yen and declines in the price of DRAM chips, which are used in products such as personal computers and smartphones.

The company aims to work out its rehabilitation plans by the end of June, including a possible capital and business alliance with U.S. chipmaker Micron Technology Inc., the sources said.

To obtain the government’s approval for the extension, the company needs to fulfill such conditions as showing the prospect of improving earnings, but the business environment is likely to remain difficult.

Total capital will be slashed to ¥86.1 billion following approval at an extraordinary general meeting of shareholders March 28, the semiconductor maker said.

The ¥150 billion worth of capital will be transferred to a surplus account to finance dividend payments and equity buybacks, the company said.

After its fortunes deteriorated, Elpida issued the preferred shares to the government-backed DBJ in August 2009 under a business turnaround plan. Under the terms of the deal, the DBJ can from April request that Elpida buy back the shares, estimated to be worth ¥31 billion.

Elpida will ask shareholders to approve a plan to raise the limit on authorized common stock from 400 million to 800 million shares in readiness for future capital increases.

The manufacturer’s earnings are continuing to plunge amid declining prices and the yen’s appreciation, and it has been seeking capital and business alliances with other semiconductor makers, including Micron.

Meanwhile, Goldman Sachs and Credit Suisse have each acquired substantial stakes in Elpida and become major shareholders, the two groups said.