Wednesday, March 25, 2009
Japanese PC chip maker Elpida Memory Inc (6665.T) said it would raise 46 billion yen ($471 million) by issuing shares in two subsidiaries, aiming to shore up its balance sheet and avoid breaching debt covenants.
Elpida, the world's third-biggest maker of dynamic random-access memory (DRAM) chips, has fallen deep into the red as the industry endures through its worst-ever downturn, with prices and demand falling.
The company has been looking to raise money to bolster its balance sheet after being forced in December to redeem most of a 50 billion yen convertible bond due to a slide in its share price.
Elpida said in a statement on Wednesday that it would issue mainly preferred shares in two subsidiaries set up this month to five business partners, two of which are overseas firms. It did not disclose their names.
The move allows Elpida to raise funds without issuing its own stock, which would have been difficult given the dour near-term outlook for its earnings and with its share price down some 80 percent over the past year.
Elpida spokeswoman Kumiko Higuchi said the fund raising would also boost net assets on its balance sheet to a level that should allow it to meet a key debt covenant when it closes its books for the financial year on March 31.
"At this moment we are not planning to use the money for investments," Higuchi said. "The main purpose is to strengthen our balance sheet."
Elpida also announced that it exchanged class A shares in a semiconductor testing company for common shares, making it a consolidated subsidiary. That move will add another 5-6 billion yen to the net asset tally on its consolidated balance sheet.
All major makers of DRAM are losing money as slowing demand for PCs and other devices depresses the need for memory chips. The tough conditions pushed German DRAM maker Qimonda (QMNDQ.PK) to file for insolvency in January.
In February Elpida reported its fifth straight quarterly loss and is expected to be deep in the red for the full year ending this month. [ID:nT28454]
Elpida's capital raising comes as the Taiwan government works on plans for a new company to pull together its struggling memory chip makers and bring in technology from either Elpida or U.S.-based Micron Technology Inc (MU.N).
Higuchi said Elpida hoped it would be chosen as the technology partner for the new Taiwan firm.
Prior to the announcement shares in Elpida closed down 2.3 percent at 557 yen. The benchmark Nikkei average .N225 lost 0.1 percent.
By: DocMemory
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