Foxconn, formally known as Hon Hai Precision Industry Co., has reached an agreement with Sharp Corp.’s banks to extend a 300 billion yen ($2.7 billion) credit line to the troubled Japanese electronics major, Bloomberg reported, citing Japanese newspaper Yomiuri Shimbun, Saturday.
The agreement will reportedly allow Sharp to borrow from its lenders Mizuho Financial Group Inc. and Mitsubishi UFJ Financial Group Inc., if it suffers losses from potential liabilities or needs new investments. However, the banks may wait for a month for Sharp’s repayment of about 510 billion yen ($4.57 billion) in loans due at the end of March if talks with Hon Hai are extended.
Sharp had been looking to divest its core TV business after booking more than 1.2 trillion yen ($10.76 billion) in losses over the past four years. The sale resulted in a two horse race between Hon Hai, the world’s largest contract electronics maker, and the Japanese government-backed Innovation Network Corp. of Japan (INCJ). By early February, Foxconn, had reached a consensus with Sharp on a tentative offer worth $5.9 billion.
However, later in February, Foxconn put the deal on hold over alleged previously undisclosed financial liabilities of about 300 million yen ($2.66 billion).
Foxconn has said that it would delay the agreement in order to review Sharp’s performance in the current quarter. The Taiwanese company is taking extra precautions with the period’s financial results because of the last-minute notice about the liabilities, Bloomberg reported, citing sources.
Sharp, which also makes displays for smartphones and tablets, is currently dependent on its main lenders for survival.