News for Credit Professionals       NACM-SE

Japanese Manufacturer Moves to Protect Itself from U.S. Creditors

Weeks after garnering the dubious distinction of becoming the largest Japanese manufacturing bankruptcy in the nation’s history, Elpida Memory Inc. is looking to protect its assets from U.S.-based creditors.

Elpida filed this week in the Third Circuit of the U.S. Bankruptcy Court in Delaware seeking Chapter 15 bankruptcy protection. The lesser invoked chapter has been used to protect foreign-based companies with significant U.S. interests while going through the reorganization process. Elpida listed assets and debts in the U.S. filing at about $1 billion.

Elpida’s initial filing in Japan, a rarity, included reported liabilities in the neighborhood of $5 billion, far too great to overcome without restructuring. The computer memory chip manufacturer, once a big part of a booming exporting industry dominated by Japan, has had trouble keeping up with foreign counterparts. The bulk of that competition, driven by lower costs, comes from outfits in South Korea, primarily Samsung.

Also not helping the Elpida and its contemporaries is that its chips are used for computers and laptops, not necessarily the growingly popular smart phones/devices like the iPhone/iPad and similar products. Additionally, the overvalued yen, which has become a bit of a magnate as investors leave the unstable euro, has made it harder for Japanese-based exporters to compete and threatens Japan’s long-held trade strength.

NACM Economist Chris Kuehl noted this case could foreshadow an uptick in business bankruptcy filings from Japanese-based companies. With so many problems challenging the nation’s economic prospects and businesses there, Kuehl intimated the time when it could be safely assumed Japanese-based customers would always pay their creditors may be ending in the near future.

Brian Shappell, NACM staff writer