Micron Technology (MU) is in the news this week because of the likelihood that the company will soon be the rehabilitation sponsor for Elpida Memory.
Recently, the bankruptcy managers of Elpida decided to select Micron as its sponsor for rehabilitation. With this deal, Micron will provide Elpida with $2.5 billion in financial assistance. The money will be divided between improving Elpida’s battered finances and repaying the company’s many debts. Elpida will also be allowed to keep two of its plants in the Hiroshima and Akita prefectures. This is necessary, as the company is Japan’s only manufacturer of random access memory chips. Very soon, Micron will receive preferential negotiation rights, with the final deal likely to conclude toward the end of the month. Micron was in partnership talks with Elpida until just before the latter company filed for bankruptcy protection in February this year. If all goes well, Elpida will submit a corporate rehabilitation plan based on the proposal from Micron to the Tokyo District Court by August.
The competition for the role of rehabilitator was stiff, but Micron came out on top mainly due to the fact that it plans to keep the company’s two key plants in the Hiroshima and Akita prefectures and to keep all of the employees currently working for Elpida. This made the company the most favorable option, as far as Elpida was concerned.
In order to do this, Micron will have to dip into its cash reserves and issue corporate bonds.To continue reading, click here.