The bankruptcy administrators of chip-maker Elpida Memory Inc. have decided to select U.S. firm Micron Technology Inc. to sponsor its rehabilitation program, sources said Saturday.
Micron has offered a total of ¥220 billion in financial assistance and would also allow Elpida, Japan’s only maker of dynamic random access memory chips, to retain its two main plants in Hiroshima and Akita prefectures, the sources said.
The U.S. chip manufacturer will likely receive preferential negotiation rights Monday, and a final deal could be concluded by the end of the month, according to the sources.
The administrators are poised to draw up a corporate rehabilitation plan for Elpida based on Micron’s proposal, which would be submitted to the Tokyo District Court no later than August.
Micron proposed investing more than ¥100 billion to improve Elpida’s battered finances, while the remainder, estimated to come to between ¥80 billion and ¥100 billion, will likely be used to repay the company’s debts to clients and creditor banks. Micron plans to dip into its cash reserves and issue corporate bonds to raise the funds.
Following Elpida’s collapse in February, Toshiba Corp. and South Korea’s SK Hynix Inc. expressed an interest in sponsoring the firm’s rehabilitation plan but both ultimately dropped out of the race.
Micron and China’s Hony Capital participated in the second round of bidding to sponsor Elpida’s rehabilitation Friday. The administrators, including Elpida President Yukio Sakamoto, apparently favored the U.S. company because of its stance on the two key plants and its pledge to strive to retain all of Elpida’s current employees.
Micron has projected that Elpida would be able to keep both plants if the facilities’ book values are slashed to reduce depreciation costs, according to the sources.
However, Elpida will still likely require additional measures, such as debt forgiveness by creditor banks. The company is expected to try to negotiate possible debt reductions with its creditors, but a favorable outcome is considered difficult.
Elpida filed for court protection from its creditors under the Corporate Rehabilitation Law in late February with liabilities of ¥448 billion, a record for a failed domestic manufacturer. Micron discussed forming an alliance with the struggling chip-maker just before it filed for bankruptcy protection.