Elpida bondholders threaten to thwart auction

TOKYO, JAPAN: A group of bondholders of bankrupt Japanese semiconductor maker Elpida Memory Inc have threatened to thwart the auction of the company's assets if trustees agree to a reported selling price of 150 billion yen ($1.9 billion).

In a filing to a Tokyo district court on April 27, the bondholders said they could submit a rival reorganization plan if the bankruptcy trustees agreed to a low-ball bid that would "unintentionally transfer great value to the winning sponsor".

U.S.-based Micron Technology and South Korea's SK hynix are among a handful of chipmakers and funds that have shown interest in Elpida ahead of the final round of bids due as early as this week.

The Nikkei newspaper has reported that Micron, which had been discussing a tie-up with Elpida before it went bankrupt, had offered at least 150 billion yen in the first round that closed on March 30.

In contrast to the United States, it is rare in Japan for creditors to get involved in the restructuring of a bankrupt company. Last year a group of foreign creditors of failed consumer lender Takefuji filed a motion seeking a better recovery on their debts, but it was rejected by the court.

The Elpida bondholders did not identify themselves by name in the filing, but said their group held aggregate claims of about 50 billion yen and included financial institutions with major operations in Japan and funds that invest on behalf of Japanese.

The bondholders said they may also seek recognition for a committee representing themselves and other unsecured creditors to participate in Elpida's reorganization. They noted that unsecured creditors in total held claims of about 249 billion yen, or nearly three times secured creditors' claims.

A translated version of the statement by bondholders was also filed in U.S. bankruptcy court in Delaware.

Elpida has been looking for an investor to help keep it in operations since filing for bankruptcy in late February with 448 billion yen in liabilities, marking the biggest failure ever by a Japanese manufacturer.

At the time of its bankruptcy, it had 45 billion yen worth of yen bonds outstanding in three issues, $75 million worth of dollar bonds and 87.5 billion yen worth of convertible bonds in two separate issues, according to Thomson Reuters data.

The emergence of a rival plan from Elpida's bondholders could nevertheless complicate the auction, which is being overseen by Elpida CEO Yukio Sakamoto and lawyer Nobuaki Kobayashi, the court-appointed trustees.

There is no clear front-runner.

In addition to Micron and SK hynix, private equity firm TPG Capital LP TPG.UL and China's Hony Capital are jointly placing a bid, sources with knowledge of the matter have told Reuters.

Hony plans to sell or outsource the operations at Elpida's Hiroshima DRAM plant to Semiconductor Manufacturing International Corp (SMIC) if its bid is successful, the Nikkei reported earlier this week.