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Sharp Labors To Find Finances To Pay Billions in Debts

Another floundering tech company is poised to join the ranks of companies that may soon ran out of gas. Sharp Corp shares fell to almost 13 percent last 31 August, the biggest drop in almost a month.

The dive was attributed to the sudden leaving of chairman of Hon Hai Precision Industry Co Ltd’s . The incident casted doubt on investors over the company’s future.

The Japan-based Sharp Corp makes LCD TV panels for end users as well for other companies like Apple. Aggressive pricing and weak consumer demand for TV sets have pummeled the company amidst its ongoing efforts to look for billions of dollars to pay its maturing debts.

Standard & Poor also downgraded the company’s debt to junk mentioning concerns that the company is having difficulty paying off its debts.

The rating agency remarked: “Sharp’s liquidity position is weakening, in Standard & Poor’s view. Internal cash flow remains weak, and financial market conditions for the company have deteriorated.”

The company currently gets a BB+ rating but Standard & Poor is saying that the organization is keeping a close eye for a possible further downgrade.

Sharp is still in on-going negotiation with Hon Hai, a Taiwanese firm, to cede about 9.9 percent of the company’s stake in exchange for cash.

A Sharp representative said that the company hopes to reach a deal with Hon Hai sooner. A deal with Hon Hai will not only offer a chance for survival but also stretch the company’s LCD , TV screens, and mobile phone business.

Hon Hai has also hinted that there was still no timetable for the conclusion of the talks, though the trend is positive.

Terry Gou, Hon Hai Chairman, defended his act by saying that he had “lost faith” in both Japanese and Taiwanese media over their negative reporting of the deal, prompting his skipping of a news conference at a site both owned by Hon Hai and Sharp. He said that his sudden departure has nothing to do with the partnership talk and he’s hoping for an agreement this week.

Hon Hai had initially agreed to pay about $854 million for a 9 percent stake of the company, but sought to lower its asking price again in August after the LCD-maker’s  stock fell below 200 yen a share.

Gou also said that his decision to go ahead with the purchase of Sharp’s 9.9 percent stake will depend on whether the Japanese firm will take his advise on how to turn things around. Sharp got its name from the popular mechanical pencil it invented a century ago.

As if the financial trouble is not enough, Sharp is also having issues coping up with its commitment to Apple, said Reuters on Friday.

The report said that Sharp is currently behind schedule in providing screens for Apple’s most recent iPhone.

Sharp expects to lose about $1.2 billion in revenue during this current business year.  It also needs to find ways to get about 200 billion yen this coming September to pay a maturing convertible bond, and a further 360 billion yen to refinance a short-term commercial paper.

source: reuters