Japan Display To Spin Off Smartphone Panels For More Funds

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Apple's largest display supplier inches closer to reaching bailout goal
TOKYO -- Cash-strapped LCD maker Japan Display said Friday it will turn the company's smartphone panel business into a separate subsidiary and seek infusions of outside capital as the company scrambles to cobble together a viable restructuring plan.

The spin-off will take place by the end of the year, the company known as JDI said Friday. Chinese liquid crystal display makers Visionox, TCL and Tianma Microelectronics are among the companies interested in buying a stake in the new unit, sources say.

By splitting off the mobile panels business, the resulting parent company will focus on onboard vehicle displays. Smartphone displays are exposed to sharp swings in demand, and this arrangement will minimize that risk for JDI. China's Harvest Fund Management, one of JDI's bailout partners, is receptive to the move because automotive displays are a relatively stable business.

Unveiling a new restructuring plan while still struggling to secure funding for survival is an unusual move. Given the many stumbles the company has encountered so far, the prospects for the latest plan remain uncertain.
JDI also said Friday it is close to securing the 80 billion yen ($739 million) needed to stay in business.

Harvest raised its pledged injection to 63.3 billion yen from 52.5 billion yen, while Hong Kong-based hedge fund Oasis Management will foot roughly 16.2 billion yen. Apple is expected to invest around 10.8 billion yen, which appears to have convinced Harvest to cough up the extra funding.

JDI will ask shareholders to vote on the new funding plan at an extraordinary meeting Aug. 29. The company expects to receive the money by the end of the year.

But the rescue comes with a laundry list of caveats. JDI has yet to receive a commitment letter regarding the increased pledge from Harvest. Moreover, the bailout partner has agreed to provide cash so long as Chinese authorities do not intervene. Harvest has expressed pessimism about supporting JDI in the past, so it is possible that the investment house will reduce the injection amount.

Oasis, meanwhile, agreed to help the display maker on three conditions: that there is no cessation or large reduction in purchases from JDI's major customers, that JDI's stock price does not dip below 30 yen per share, and that JDI receives at least 60 billion yen in aid.

JDI's hunt for investors has suffered a string of setbacks as potential white knights cast doubts on the company's restructuring strategy. Taiwanese electronic components maker TPK Holding withdrew from the bailout consortium in June. Fubon Group, a Taiwanese financial institution, also pulled out that month.

As of June 28, JDI had said it secured 68.3 billion yen from Harvest and Oasis Management, and was continuing talks with other investors for the remaining 11.7 billion yen.

Japan Display is Apple's largest source of LCD panels for smartphones, and the manufacturer is expected to begin supplying organic light-emitting diode panels for smartwatches as well. A knowledgeable source said JDI will reach its cash flow goals by September.

But the company is expected to take in additional bridge financing from its largest shareholder, Japan's state-backed fund INCJ, until funding from the declared backers is secured.

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