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Business Desk

The Yomiuri Shimbun

Publication Date : 03-01-2013

Struggling major electronics maker Sharp Corp. is studying a plan to expand its capital by more than 100 billion yen (US$1.15 billion) through a public offering this spring and other measures, The Yomiuri Shimbun has learned.

The company has entered consultative talks with its two main banks--Mizuho Corporate Bank and the Bank of Tokyo-Mitsubishi UFJ, sources familiar with the matter said.

The capital expansion plan has emerged against the background of a decline in Sharp's capital adequacy ratio, a barometre of management soundness.

Sharp wants to enhance its creditworthiness by improving its financial foundation through a capital increase. The funds raised from the capital expansion will be used to bolster the manufacturing of liquid crystal display panels, its main business line.

The company posted huge deficits for fiscal 2010 and 2011. Its capital adequacy ratio is likely to drop to 8 per cent or so by the end of fiscal 2012 in March.

To make matters worse, Sharp will be required to book a shortfall of pension reserves for employees as a liability in its financial statement for the year to March 2014.

In their consultations, Sharp and its two main banks agreed the struggling manufacturer's capital adequacy ratio must be enhanced to more than 10 per cent.

The two banks want to complement Sharp's creditworthiness by boosting its capital through the combined use of subordinate loans, which can be regarded as owned capital, and preferred shares in addition to increasing capital through a public offering.

Sharp plans to incorporate the capital expansion plan in a medium-term management plan it will likely unveil in February.

*US$1=87.14 yen