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June 23, 2017

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Hon Hai issues Japanese yen-denominated bonds to raise capital

TAIPEI--Hon Hai Precision Industry Co., the world's largest contract electronics maker, said Thursday it has issued Japanese yen-denominated company bonds through its wholly-owned unit Foxconn (Far East) Ltd. to raise 14 billion yen (US$146 million) as working capital.

Hon Hai said the company bonds are made up of two trenches -- one worth 10 billion yen carrying a fixed interest rate of 1.28 percent, and the other worth 4 billion yen -- priced at a floating rate of the three-month London interbank's rate, plus 1.10 percentage points.

The bonds have a maturity of three years plus one day, according to Hon Hai.

While the market has speculated that this fund-raising activity is aimed at financing Hon Hai's plan to acquire a stake in Japan-based electronics giant Sharp Corp., the Taiwanese firm said the company issuing bonds had nothing to do with Sharp.

Talks of Hon Hai acquiring a stake in Sharp are still under way, the Taiwanese firm said, but denied any market speculation, which said that the bonds are being sold to fund the acquisition.

In March 2012, Hon Hai and Sharp had reached an agreement for the Taiwanese firm to acquire a nearly 10 percent stake in Sharp for 550 yen per share. But both sides had entered renegotiations on the terms since August, including the acquisition price. This was after the Japanese firm's share prices fell sharply amid concerns over its bottom line.

Market analysts said that as the yen is weakening and Japan keeps pumping funds into the market to depress its currency, Hon Hai is expected to reap foreign exchange gains by issuing yen-denominated bonds.

Meanwhile, Hon Hai said it will continue to invest in its 3C product retail operations in China as planned, rejecting some Chinese media reports, which said that the electronics maker plans to scale back its retail investments on the mainland.

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