Corporate investors agree to fund Renesas

Bloomberg

Renesas Electronics Corp. has reached a basic agreement to receive support from its largest shareholders, while the beleaguered company’s major lenders will provide additional funding.

The world’s largest maker of microcontrollers for cars and electronics will outline its restructuring plan by the time it announces first-quarter earnings, President Yasushi Akao said at a shareholders’ meeting Tuesday. Details of the support from lenders and Renesas’ three biggest investors, NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp., are still being negotiated, he said.

Renesas, which hasn’t posted a profit since it was founded in 2010, plans to raise ¥100 billion in capital and eliminate more than 10,000 jobs, a source said last month.

The Kawasaki-based company posted ¥178 billion in losses in the past two years amid a slowdown in demand for system chips used in TVs. It will report earnings in late July, said spokesman Yoichi Kobayashi.

Banks including Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. have agreed to continue offering almost ¥50 billion in lines of credit to Renesas, according to two other sources.

NEC and Hitachi said June 20 they plan to support Renesas, although details haven’t been decided. Mitsubishi Electric President Kenichiro Yamanishi said May 21 his company may consider “taking some kind of action” to help Renesas.

NEC, Hitachi and Mitsubishi Electric own a combined 91 percent stake in the chipmaker, according to data compiled by Bloomberg. Hitachi and Mitsubishi Electric may provide ¥34 billion in loans, while NEC may extend payment deadlines for its services and products to the chipmaker, the Asahi Shimbun reported June 19.

Renesas may also sell ¥50 billion in new shares to KKR & Co., a U.S. private equity fund, the Nikkei financial newspaper said Saturday.

The company was formed in 2010 after the merger of money-losing chipmakers Renesas Technology Corp., a venture between Hitachi and Mitsubishi Electric, and NEC Electronics Corp. The strengthened yen eroded Renesas’ earnings from overseas, while last year’s disasters in Japan and flooding in Thailand disrupted production.

Shares in Renesas have tumbled 33 percent this year.

The chipmaker’s microcontrollers are used in products from automobiles to consumer electronics for such tasks as triggering air bags and controlling DVD players.

Renesas’ customers include Sony Corp., Panasonic Corp. and Sharp Corp., which posted a combined ¥1.6 trillion in losses last fiscal year amid declining demand for televisions and competition from South Korean firms.