Sharp, banks near US$1.7b bailout deal: source

Tokyo

JAPAN'S Sharp Corp and its main banks were set to agree on Thursday to a US$1.7 billion rescue-and-restructuring plan that will likely include a promise to split off its ailing smartphone display business, a person involved in the discussions said.

As part of its second major bailout in three years, Sharp's lenders, Mizuho Bank and Bank of Tokyo-Mitsubishi UFJ, will inject a combined 200 billion yen (S$2.3 billion) in a debt-for-equity swap, the source said, declining to be identified as he is not authorised to speak publicly on the matter.

The loss-making company will also pledge to scale back its North American television operations and cut around 5,000 jobs, or 10 per cent of its global workforce, the source said.

The source added the LCD operations, while likely to be split off to improve transparency and accountability, would continue to be owned by Sharp for now.

Haggling over the extent of job cuts and restructuring had held up the talks, with the company initially reluctant to split off the LCD division, which accounts for 30 per cent of Sharp's sales, company and banking sources have previously said.

Analysts have said that splitting off the division could pave the way for a deal such as a merger with rival Japan Display Inc - a possibility which Sharp has denied considering.

While relief that a deal with lenders was in its final stages boosted Sharp's shares 4.5 per cent to their highest level since December, the plans are likely to viewed as not going far enough by many investors.

"The restructuring is likely to stop the bleeding in terms of losses and cash flow, but it's not going to resolve the basic problems," said Yasuo Sakuma, executive officer at Bayview Asset Management. "It's difficult to assess positively since we're not seeing any strategy towards future growth."

Sharp spokeswoman Miyuki Nakayama said the company was considering various options but nothing had been decided, adding that more will be revealed in May, when it releases a new business plan.

Representatives for the lenders declined to comment.

The parties were unlikely to make any announcement on Thursday after CEO Kozo Takahashi planned to meet with bankers to finalise a deal, the source said. REUTERS