Sharp gains $1.9 billion bailout but restructuring steps disappoint

Thu May 14, 2015 7:12am EDT
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By Ritsuko Ando

TOKYO (Reuters) - Japan's Sharp Corp said it had secured a $1.9 billion bailout, its second major bank-led rescue in three years, after falling deep into the red as its smartphone display business was battered by competition from Asian rivals.

But while new restructuring measures will include 5,000 job cuts or 10 percent of its global workforce as well as the sale of its headquarters, the steps were seen as not going far enough.

Chief Executive Kozo Takahashi said he was not considering spinning off the company's troubled display business and would continue making TVs in Japan, leaving investors doubting the company's long-term viability.

"The current business model is not convincing," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. "It has cutting-edge display technology but it's not profitable."

Under the deal, main lenders Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ will inject a combined 200 billion yen ($1.7 billion) in a debt-for-equity swap.

Japan Industrial Solutions, a corporate turnaround fund owned by a consortium that includes the two banks, will also provide 25 billion yen in return for preferred shares.

But while its lenders signed off on the bailout, they did not view Sharp's restructuring measures as complete. A senior official at one of Sharp's main banks said the announcement lacked a solid turnaround plan for the display business.

"Consideration of more measures including possible mergers are necessary. That's going to take time," the banker said, declining to be identified due to the sensitivity of the matter.   Continued...

A man using his mobile phone walks under a logo of Sharp Corp outside an electronics shop in Tokyo, Japan, May 13, 2015.  REUTERS/Yuya Shino