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Chip maker failed to find partner as bonds, loans came due simultaneously [The Yomiuri Shimbun](Yomiuri Shimbun (Tokyo, Japan) Via Acquire Media NewsEdge) Feb. 28--Trust between Elpida Memory Inc. and its banks gradually eroded as Elpida President Yukio Sakamoto struggled to find a business partner that could lift the ailing semiconductor maker's fortunes. Elpida filed for bankruptcy protection Monday, 13 years after it was launched in 1999. The company was thought to be representative of Japan's semiconductor industry, as it comprised semiconductor divisions formerly operated by major electrical appliance makers NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp. The chip maker had been facing severe difficulties in raising funds due to the yen's appreciation and worsening market conditions. Elpida put its last hope in tie-up negotiations with foreign and domestic companies, but the semiconductor maker had to turn to bankruptcy as the talks ended in failure. Late last week, officials of Elpida's four main banks--the Bank of Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corp., Mizhuho Corporate Bank and Sumitomo Trust & Banking Co.--were shocked when the semiconductor maker withdrew without a credible explanation all the money it had deposited in their banks. Elpida's deadlines for repaying its corporate bonds and loans were looming--15 billion yen of corporate bonds were to become payable on March 22, and the repayment of about 10 billion yen to the Development Bank of Japan and about 67 billion yen to 14 banks, including three megabanks, was due on April 2. Before withdrawing the money from the banks, Sakamoto had been negotiating with the banks to refinance the loans. He stressed the company's tie-up negotiations with Micron Technology Inc., a U.S.-based major semiconductor maker, and other companies as a positive factor to the banks, according to sources. The officials of the banks were shocked with Elpida's withdrawal of the deposits because the action apparently ran contrary to Sakamoto's explanations and attitude. The semiconductor maker was vague when it explained to the banks why it wanted to withdraw the money, saying only it had to "prepare for an emergency." On Monday, the banks learned that Elpida would hold an extraordinary board meeting on the day. Elpida gave almost no indication to the banks that it intended to file for bankruptcy protection, indicating how much trust had been lost between them. Since early this year, Sakamoto had been negotiating with several companies, including Micron, on tie-ups. However, in the past, Sakamoto had tie-up negotiations with a Taiwan company in 2009, and then with Toshiba Corp. As Elpida's negotiating partners changed so frequently, banks became unsure about which company was Elpida's most likely partner. Gradually, they began sharing the feeling that it would be difficult to provide additional funds to Elpida solely based on explanations that it was negotiating with other companies. A perceptional gap emerged between the Development Bank of Japan--a government-related institution--and the four private banks on helping Elpida. In December, the four banks issued a document under their joint signature, saying it was necessary for the government to extend the application period of the Law on Special Measures for Industrial Revitalization for Elpida, which expires on March 31, in order for them to continue their support of Elpida. However, the Development Bank of Japan believed just extending the application period was not enough. The bank said it would not issue further non-government guaranteed loans unless Elpida drew up a reconstruction program based on a business tie-up with other companies. The remarks of the Development Bank of Japan, a major provider of policy-based finance with the help of the Economy, Trade and Industry Ministry, created a stir among people related to Elpida's reconstruction. On Thursday, Sakamoto said the company planned to double the limit on the issuance of its ordinary stocks at an extraordinary board meeting scheduled in late March, eyeing a business tie-up with other companies. However, four days later, the company filed for bankruptcy protection under the Corporate Rehabilitation Law, a process in which shareholders are required to bear a heavy burden. "Up until today, I hoped there would be a tie-up offer, but it did not materialize," Sakamoto said at a press conference held Monday. Reaching a business tie-up agreement was a precondition for the banks to further provide assistance to Elpida. "I concluded it would be difficult for us to receive additional assistance from banks," Sakamoto said. Sakamoto to stay Under the Corporate Rehabilitation Law, Elpida's bank loans and money owed to clients could be reduced significantly. Elpida's huge amount of debt was one of the reasons companies hesitated to tie up with the chip maker. Elpida's mainstay factory in Higashi-Hiroshima, Hiroshima Prefecture, is known for its high technological prowess. The court is expected to highlight the value of the factory to call for companies to support Elpida. According to sources, Micron Technology, Toshiba and South Korean semiconductor makers may apply to support Elpida. At the press conference, Sakamoto said he will stay on as president for the time being to find business partners. However, people related to the company's reconstruction expressed doubt whether Sakamoto, who had failed to find a business partner or reconstruct the company's finances, should be involved in finding companies that would support Elpida's reconstruction after filing for bankruptcy protection. ___ (c)2012 The Yomiuri Shimbun (Tokyo) Visit The Yomiuri Shimbun (Tokyo) at www.yomiuri.co.jp/dy Distributed by MCT Information Services |