Bain proposes Japan's Kioxia IPO to clear $5.8 billion loan refinance

FILE PHOTO: Japanese chipmaker Kioxia's logo is displayed at its headquarters in Tokyo, Japan, September 30, 2021. REUTERS/Kim Kyung-Hoon/File Photo

TOKYO (Reuters) -Bain Capital has proposed an initial public offering (IPO) of Japan's Kioxia Holdings as part of a plan to allow the money-losing chipmaker to refinance a $5.8 billion loan coming due in June, according to a person familiar with the matter.

Bain and Kioxia met with a group of banks including Sumitomo Mitsui, Mizuho and Mitsubishi UFJ on Monday after the lenders urged Kioxia to come up with a recapitalisation plan because it looks likely to run afoul of the terms of a 900 billion yen ($5.8 billion) syndicated loan, the person said.

Formerly Toshiba Memory, Kioxia was acquired by a Bain-led group in a $18 billion carve-out in 2018. The maker of memory chips is expected to have posted a loss for the year that ended last month, according to the person. That would mark its second straight annual loss and push its net assets below the roughly 500 billion yen required under the terms of the loan, the person said.

Under the plan presented to the banks, Kioxia expects to return to profit in the year to March 2025, seeing earnings of around 130 billion yen.

The person declined to be identified because the information has not been made public. Details of Kioxia's finances were confirmed in a review of the plan presented to banks by Reuters.

Kioxia, Mizuho and Mitsubishi UFJ declined to comment. Sumitomo Mitsui did not immediately reply to a request for comment. Bain could not immediately be reached for comment.

It was not immediately clear if the banks had accepted the proposal. The timing of the proposed listing was also not clear, though the person said it would come after the June refinancing.

Kioxia would also need to present a convincing growth plan to future investors, the person said.

Kioxia, which been hammered by a slump in the market for memory chips, remains a prominent chipmaker even as Japan has ceded influence in the sector to Taiwan and South Korea.

The Japanese government aims to revive the country's lost position as a major chipmaking centre and is extending subsidies to Kioxia and other companies.

There are also been some signs of a pick-up in demand for the memory market.

The banks want the refinancing to pave the way for reviving merger talks with U.S. chipmaker Western Digital, according to the source.

Talks between the two to merge and create a memory chip powerhouse stalled last year due to opposition from South Korea's SK Hynix, which is an investor in Kioxia.

The banks had previously pledged to provide a loan of about 1.9 trillion yen on the condition that Kioxia would merge with Western Digital.

($1 = 154.5300 yen)

(Reporting by Miho Uranaka, Additional reporting by Makiko Yamazaki and Maki Shiraki; Editing by Nobuhiro Kubo, David Dolan and David Evans)

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