Business / Corporate

Sharp's ¥200 billion bailout approved by Mizuho, BTMU

Kyodo

Sharp Corp. has effectively been given the green light to receive ¥200 billion ($1.7 billion) in financial support from its two main creditor banks on condition it engages in more drastic restructuring, sources close to the matter said Thursday.

Mizuho Bank and the Bank of Tokyo-Mitsubishi UFJ will help the struggling electronics maker to increase its capital through a debt-for-equity swap in their first full-fledged financial bailout since 2013, the sources said.

The Osaka-based company, whose solar cell and television divisions are in the red, estimates it will incur a group net loss of around ¥200 billion for the business year ended March 31.

Sharp is also planning to receive ¥25 billion from a corporate reconstruction fund the two banks have invested in, the sources added.

On Thursday Mizuho and BTMU separately approved a capital injection in Sharp at meetings of their executive officers, calling on the company to steadily execute its rehabilitation plan, the sources said.

The two banks will invest ¥100 billion each. They are expected to make a formal decision at their board meetings slated to be held by the end of the month.

In an attempt to turn its business around, Sharp has been considering cutting jobs, closing its liquid crystal display TV production plant north of Tokyo and selling its head office in Osaka.

The electronics maker managed to return to profitability for the first time in three years in the business year through March last year, as it shifted its focus to small-to-medium display panels for smartphones and its efforts to revamp its flagging TV and LCD panel businesses paid off.

But Sharp is now facing intensifying competition from Chinese and South Korean rivals that are attracting customers with their lower-cost display panels.

The company has said it will unveil in May its new medium-term business strategy, entailing a variety of restructuring measures.

As of March last year, Sharp had borrowed about ¥380 billion from BTMU and around ¥360 billion from Mizuho.

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