By Pradeep Saran, September 21,2023
Reuters reported that lenders of Kioxia Holdings are actively strategizing to refinance a substantial 2 trillion yen ($13.5 billion) in loans. Their goal is to extend this financial support in anticipation of Kioxia’s prospective merger with Western Digital’s flash memory business. This significant development comes in light of a challenging period for the flash memory market.
According to unnamed sources cited by Bloomberg News, key financial institutions involved in this endeavor include Sumitomo Mitsui Financial Group, Mizuho Financial Group, and Mitsubishi UFJ Financial Group. Their plan is to submit a commitment letter outlining the terms of this refinancing arrangement next month. Additionally, part of the loan proceeds will be allocated to provide special dividends to Kioxia’s shareholders.
As per the negotiations taking place, Western Digital is anticipated to hold a majority stake of approximately 50.5% in the combined entity, while Kioxia will hold the remaining 49.5%. It’s noteworthy that Western Digital’s hard drive business is not expected to be included in this merger.
Notably, Kioxia has not officially disclosed any information regarding this matter and has refrained from commenting on the reports. Similarly, Sumitomo Mitsui Financial Group, Mizuho Financial Group, and Mitsubishi UFJ Financial Group have chosen not to comment on these developments as well.
Of the 2 trillion yen loan, it is expected that approximately 400 billion yen will be sourced from loan commitments, and the Development Bank of Japan is set to provide an additional loan of 300 billion yen. The remaining portion is likely to be equally distributed among the three prominent financial institutions involved in this refinancing initiative.
The merger discussions between Kioxia and Western Digital have been expedited in recent months as both companies seek to finalize the deal structure. This urgency is driven by the challenges faced by the flash memory market, signaling their intent to navigate these challenging times through a strategic partnership.