Sharp Corp. forked over some of its equity to banks last week after defaulting on debt to the lenders, winning a new lease on life that leaves it dependent on their goodwill and the support of Apple Inc., its biggest customer.
Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. injected ¥200 billion into the nation's biggest seller of liquid-crystal televisions in what Standard & Poor's called a "de facto debt-for-equity swap." S&P cut Sharp's rating to selective default on June 30, the day it sold preference shares to the lenders to repay debt. The rating company raised the score by six levels the next day to reflect the improved balance sheet due to the stock sale.
Sharp depends on Apple for 20 percent of sales and is facing more losses even as Japanese rivals including Panasonic Corp. and Sony Corp. recover. Sharp's credit default risk remains the highest among Asian technology companies at 680 basis points, according to CMA data, as lower-cost competitors undercut it in producing liquid-crystal displays used in everything from smartphones to TVs.