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MMC on verge of ¥200 billion public share offering

Scandal-hit carmakers' creditors look to ditch 'pointless' preferred stock from bailout

Bloomberg

Mitsubishi Motors Corp. is nearing a decision to raise as much as ¥200 billion via a public offering of new shares as it seeks to reduce preferred stock held by other group companies, two sources with direct knowledge of the plan said.

MMC will probably announce the plan after reporting half-year financial results at the end of October, and the sale will likely occur between January and March 2014, the sources said.

Tokyo-based MMC spokesman Kai Inada said nothing has been decided.

The public offering would be part of a reorganization involving Mitsubishi UFJ Financial Group Inc., Mitsubishi Heavy Industries Ltd. and Mitsubishi Corp., according to the sources.

Those companies, which bailed out their automaker affiliate in 2004 and 2005, have been stuck with billions of dollars of preferred shares — convertible into common stock — that never generated any dividends.

Though independent, the companies are among the hundreds of Mitsubishi-named businesses that trace their roots to a shipping firm founded by Yataro Iwasaki in 1870, making them the oldest business collective in Japan. Of those, 28 members form an informal group known as the Kinyokai.

The Mitsubishi companies that bailed out their car affiliate have been seeking to convert their preferred stock because the absence of dividend payments rendered them pointless, since preferred shares don’t carry voting rights.

Mitsubishi Motors has said it plans to eliminate all outstanding preferred shares before the fiscal year ends in March 2014, when it plans to resume dividends for the first time since the carmaker discontinued such payments in 1998.

As a precursor to the resumption of the payments, the company decreased its capital by 75 percent and canceled all of its ¥433.2 billion in capital reserves in August to erase more than ¥900 billion in accumulated losses. Japanese companies in Japan can’t pay dividends if they have no retained earnings on their balance sheet.

While the sale would undermine its share price, the carmaker owes its existence to other Mitsubishi companies, receiving cash, debt waivers and loans exceeding more than ¥1 trillion in the middle of the last decade. The carmaker needed a bailout after an admission that it covered up production defects for more than two decades led to a sales slump from which the carmaker hasn’t fully recovered.

Things have looked up more recently, as Prime Minister Shinzo Abe’s success in weakening the yen since late last year helped lift the profitability of Japanese exporters. Mitsubishi Motors is now forecasting net income will rise 32 percent to a record ¥50 billion this fiscal year — a target that analysts expect the company to beat.

Last year, the carmaker began production at a third factory in Thailand to meet higher demand in Southeast Asia. It’s aiming to double sales in China this year and in Japan, the company has teamed up with Nissan Motor Co. to develop vehicles with small engines.

Sharp plans share issue

Kyodo
OSAKA

Struggling electronics maker Sharp Corp. is planning to raise up to ¥170 billion through a public share offering and a third-party allotment to shore up its financial footing after an earlier funding plan fell through, sources said Thursday.

Sharp initially planned to raise roughly ¥100 billion, but has decided that it needs more money after talks with South Korea’s Samsung Electronics Co. to collaborate in the copier business abruptly ended.

The firm now expects to raise around ¥130 billion to ¥150 billion through a public offering, possibly by the end of October, up from the ¥80 billion initially planned.

The rest will be covered by a third-party allotment to companies that have business ties with it. Lixil Group and Makita Corp. will invest roughly ¥10 billion each in Sharp, and Denso Corp. roughly ¥2.5 billion, the sources said.

The move, slated to be announced next week, might shore up Sharp’s capital adequacy ratio, which had fallen to 6 percent as of the end of June, to around 10 percent.

Sharp’s finances have been hurt by flagging sales of liquid crystal display panels amid severe price competition. The company also expects to incur a roughly ¥120 billion debt in the current business year to cover a shortfall in its corporate pension plan.