Sharp offers headquarters as collateral to win bank loans
September 7, 2012, 12:19 am TWN
TOKYO -- Cash-strapped electronics giant Sharp Corp. said Thursday it was offering nearly all of its Japanese real estate — including its Osaka headquarters — as collateral to win fresh bank loans.
The unusual move comes as Sharp looks to stem massive losses that have pounded its share price and thrown into doubt a deal that would see Taiwan's Hon Hai Precision inject some desperately needed money into the Japanese firm.
The plan to use real estate as collateral for bank financing worth up to 150 billion yen (US$1.9 billion) excludes some properties in Tokyo's suburbs that the firm wants to sell, a Sharp spokeswoman said.
However, it does include the century-old television and smartphone maker's headquarters in western Japan and domestic production factories.
The move underscores an increasingly dire situation for the maker of Aquos brand electronics which is scrambling to repair its dented balance sheet.
Last week, Standard & Poor's cut its credit rating on Sharp to junk status after the firm said it lost about US$1.76 billion in the April-June quarter while warning of a bigger-than-expected full-year loss.
“Sharp's liquidity position has weakened, and the company is highly dependent on short-term borrowings in light of weak internal cash flow and a less-favorable funding environment,” S&P said in its Aug. 31 statement.
On Thursday, ratings agency Fitch put Sharp under review for a possible downgrade that could again see the beleaguered firm's credit rating slapped with non-investment grade, or junk, status.
Fitch cited the “increasing likelihood that the company will not be able to take timely action to maintain its investment-grade rating” and warned that a “downgrade by more than a notch cannot be ruled out as the company faces a significant challenge to turn around its operations.”
Sharp shares dived to a four-decade low last month with investors wiping around US$1 billion off its market value in just one day following the release of its dismal financial results.
The shares closed down 4.3 percent to 200 yen on Thursday in Tokyo.
To stem the bleeding, Sharp has announced a huge overhaul that could see it cut about 15 percent of its 57,000-strong global workforce, its first layoffs since 1950.
The company, which has seen its mainstay television, liquid crystal display and solar panel products struggle, said the job reductions were part of a bid to cut annual fixed costs by 100 billion yen.
Rivals Sony and Panasonic have also been swimming in red ink as Japan's electronics giants struggle to cope with a strong yen, falling prices, heavy labor costs and fierce competition from foreign rivals.