Kioxia Holdings Corp.’s lenders plan to submit a commitment letter in October for the refinancing of ¥2 trillion ($14 billion) in loans to help fund the merger with Western Digital Corp.’s flash memory business that’s still under discussion, according to people familiar with the matter.

The letter being prepared is from banks including Sumitomo Mitsui Financial Group Inc., Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., the people said, asking not to be identified because the matter is private. This would mark a step forward in the merger, which has faced months of delay.

Of the ¥2 trillion refinancing, ¥400 billion will likely be funded through loan commitments. For the ¥1.6 trillion loan, ¥1.3 trillion will probably be equally split among the three megabanks, while the Development Bank of Japan Inc. will provide the remaining ¥300 billion loan.

A part of the loan will be used to pay special dividends to Kioxia’s existing shareholders, they added. Bain Capital currently owns about 56.24% of Kioxia, while Toshiba Corp. holds about 40.64%.

Under the terms of the deal being discussed, Western Digital will hold about 50.5% of the combined holding company, while the remaining 49.5% will be held by Kioxia.

Representatives for Western Digital, Kioxia, Bain and the banks declined to comment.

Western Digital’s hard drive business is expected to remain separate and is not part of the deal, Bloomberg News previously reported.

The merged flash entity would trade on the Nasdaq initially but eventually seek a second listing in Tokyo.

Western Digital and Kioxia initially aimed to reach a merger in August, but discussions have dragged on as the companies try to iron out the details. The deal could still slip further or fall apart altogether, the people cautioned. If the merger is called off, the banks wouldn’t proceed with the loan under discussion.

One factor complicating the discussions is the planned buyout of Toshiba. A consortium led by investment fund Japan Industrial Partners Inc. began a tender offer last month that ends on Sept. 20.

The companies, which have a joint venture that produces flash chips, have been circling each other for years. Joining forces would help them take on market leader Samsung Electronics Co.

Last year, Western Digital announced a review of strategic alternatives following talks with activist investor Elliott Investment Management. Bloomberg News reported in January that Western Digital and Kioxia had revived merger talks, after discussing a pairing in 2021.

By: DocMemory
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