Hon Hai issues bonds to raise capital

Staff writer, with CNA and Bloomberg

Fri, Mar 15, 2013 - Page 14

Hon Hai Precision Industry Co (鴻海), the world’s largest contract electronics maker, yesterday said it had issued yen-denominated corporate bonds through its wholly owned unit Foxconn (Far East) Ltd to raise ¥14 billion (US$146 million) as working capital.

Hon Hai said the bonds are made up of two tranches — one of ¥10 billion carrying a fixed interest rate of 1.28 percent, and the other of ¥4 billion — priced at a floating rate of the three-month London interbank rate plus 1.10 percentage points.

The bonds have a maturity of three years and one day, according to Hon Hai.

Market analysts said that as the yen is weakening and Japan keeps pumping funds into the market to depress its currency, Hon Hai is expected to reap foreign exchange gains by issuing yen-denominated bonds.

While the market has speculated that the fund-raising activity is aimed at financing Hon Hai’s plan to acquire a stake in Japan-based Sharp Corp, the Taiwanese firm said the company issuing bonds had nothing to do with Sharp.

In March last year, Hon Hai and Sharp reached an agreement for the Taiwanese firm to acquire a nearly 10 percent stake in Sharp for ¥550 per share.

However, both sides entered renegotiations on the terms in August last year, including the acquisition price, after Sharp’s share price fell sharply.

Talks of Hon Hai acquiring a stake in Sharp are still ongoing, the company said.

Separately, Sharp will get ¥30 billion in loans from three banks this week, three people familiar with the matter said.

Resona Bank Ltd, Mizuho Trust & Banking Co and Mitsubishi UFJ Trust & Banking Corp will each lend ¥10 billion, the people said.

The banks will join a ¥360 billion syndicated loan set up by Sharp’s main lenders Mizuho Corporate Bank Ltd and Bank of Tokyo-Mitsubishi UFJ Ltd, which matures at the end of June, with the total amount remaining unchanged, they said.

Sharp is selling assets and has formed capital alliances with Qualcomm Inc and Samsung Electronics Co after posting a ¥376 billion net loss in the year ended March 31.