With a deepening recession eroding demand and prices, Spansion, the world's third-largest maker of flash storage chips, has filed for Chapter 11 bankruptcy protection. Spansion officials said they will try to restructure debt and focus investment in profitable divisions.NEW YORK (Reuters) - Spansion Inc., the world's third-biggest maker
of flash memory chips, sought bankruptcy protection in a U.S. court on
Sunday, becoming the latest chip maker to succumb to falling chip
prices and a deepening recession.
Spansion, which recently said it was exploring a sale of the
company, said it plans to use the bankruptcy process to restructure
debt obligations and refocus on its more profitable divisions.
The company and four U.S. affiliates filed for bankruptcy protection
in U.S. bankruptcy court in Delaware on Sunday, listing assets of $3.84
billion, and debts of almost $2.4 billion.
Spansion competes with Samsung Electronics and Toshiba Corp in flash
memory, which allows a device to retain data even when its power is
turned off.
The company said it plans to refocus on its embedded flash memory
products, intellectual property solutions, and the profitable parts of
the wireless segment.
Prior to the bankruptcy filing, Spansion said it has consulted with
an ad hoc consortium of holders of its $625 million senior secured
floating rate notes due 2013 and "continues to be actively engaged in
constructive discussions" on a reorganization plan with the consortium
that would enable it to emerge more quickly from court protection.
The company is also exploring proposals from multiple parties seeking a "strategic transaction," it said in a statement.
Fujitsu owns about 11.4 percent of Spansion, and Advanced Micro Devices owns about 8.7 percent.
Spansion, based in Sunnyvale, California, said it can fund expenses
and business operations with its current and expected cash resources,
but is also in discussions with its debtholders about obtaining
debtor-in-possession (DIP) bankruptcy financing.
Spansion said in court documents, that oversupply in the chip market
and sharp price drops for its products through 2007 had hurt cash flow
from operations in 2007 and early in 2008 it said it lost liquidity due
to about $122 million in sour auction-rate security investments.
The company experienced a "sharp decline" in demand again in the
fourth quarter of 2008, which combined with tight credit market
conditions and led to the bankruptcy filing, it said.
None of its subsidiaries outside of the United States and Japan have
entered court protection, Spansion said. Its Japanese arm filed for
bankruptcy protection on Feb. 9 with total liabilities of $810 million,
following in the heels of Germany's Qimonda in becoming the latest
victim of the global chip sector's downturn.
The company hired Latham & Watkins as bankruptcy counsel and has
previously said it is working with Barclays as a financial advisor.
(Reporting by Emily Chasan; Editing by Anshuman Daga)
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