Sharp's axe too blunt; lenders to push for deeper restructuring

By Taiga Uranaka and Taro Fuse

TOKYO (Reuters) - Sharp Corp's <6753.T> leading bank creditors are likely to demand a more sweeping restructuring at the struggling Japanese TV and display maker as a condition for extending new loans, said people involved in the ongoing talks.

Sharp's two main lenders, Mizuho Corporate Bank and Bank of Tokyo-Mitsubishi UFJ (BTMU), are poring over the company's restructuring plan to determine how much it needs to survive as it also renegotiates terms of an investment by Taiwan's Hon Hai Precision Industry <2317.TW>.

"Compared with Sony <6758.T> and Panasonic <6752.T>, Sharp's restructuring is not enough," said a senior banker at one of the two banks. "We will work out a plan by around mid-September to come up with a loan facility."

The banker and others involved in reviewing Sharp's business outlook declined to be named as those discussions are private. Spokespeople at both Mizuho and BTMU said their banks will support Sharp. A Sharp spokeswoman declined to comment.

The stakes are high for Sharp.

TOO FEW CUTS?

Shares in the century-old Osaka-based firm have slumped by around two-thirds since March, when Hon Hai, the world's leading contract electronics manufacturer and part of Foxconn Technology, agreed to buy around a 10 percent stake at 550 yen a share. As Sharp's condition has weakened - its shares last traded at 191 yen - Hon Hai has moved to renegotiate the March deal that would have seen it invest $844 million.

Last week, Sharp warned of a full-year net loss of 250 billion yen, eight times larger than its previous loss forecast. It is also cutting around 5,000 jobs, around a tenth of its workforce, as it battles weak demand for its Aquos TVs and competition from rivals led by South Korea's Samsung Electronics <005930.KS>.

While the job cuts at Sharp are the first in six decades, some bankers question whether the restructuring is tough enough.

"The company has never done a restructuring before. It's like a wet mop. There's a lot of water that could be wrung out," said another senior banker at one of the main banks.

GRAPHIC: Japan tech distress http://r.reuters.com/vat79s

GRAPHIC: Sharp earnings http://r.reuters.com/wyh89s

Hon Hai has said it is open to taking a larger stake in Sharp or renegotiating the share price of its planned investment. Both companies are suppliers to Apple Inc