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Elpida Memory clears hurdle on way to Micron deal

Elpida chips are seen at an electronic store in Tokyo's Akihabara district April 24, 2012. REUTERS/Toru Hanai
Elpida chips are seen at an electronic store in Tokyo's Akihabara district April 24, 2012. REUTERS/Toru Hanai

By Tom Hals

(Reuters) - Elpida Memory Inc won court approval for technology deals over the objections of U.S. bondholders, who argued the agreements were an attempt to bind the bankrupt chipmaker to a proposed $2.5 billion sale to Micron Technology Inc.

A U.S. Bankruptcy Court judge in Delaware found no evidence of collusion or improper motives Thursday in Elpida's technology licensing deals with Micron and a $15 million patent sale to Rambus Inc.

U.S. bondholders opposed the deals because they said they would effectively tie Elpida to its proposed sale and were unfairly beneficial to Micron.

"The bondholders do not cite any facts to contest the proof that these agreements confer substantial benefits on Elpida's estate," Judge Christopher Sontchi said in his 43-page opinion.

Elpida said it would be able to immediately begin improving its operations thanks to the licensing agreements with Micron. Elpida's lawyers have described the objections to the technology agreements as attacks on the Micron deal itself.

The bondholders, led by hedge funds Linden Advisors, Owl Creek Asset Management and Taconic Capital Advisors, have argued Elpida is worth nearly $4 billion. They have attacked the Micron sale as a sweetheart deal negotiated in secret in Japan, where Elpida's main bankruptcy is taking place.

Elpida filed for bankruptcy protection from creditors with a Tokyo court in February and asked the Delaware Bankruptcy Court to protect its U.S. assets soon after.

The bondholders presented their own plan for reorganizing Elpida to the Tokyo court. However, the court accepted Elpida's plan for the sale and the bondholders have shifted their fight against the deal to the U.S. Bankruptcy Court in Delaware.

Creditors are currently considering the plan to sell the company and have until the end of February to vote on it. Elpida would also need approval from the Delaware court.

The bondholders have complained about the lack of access to the Tokyo court and to information about Elpida in general. Sontchi noted in a footnote in his opinion that "there has been a troubling lack of transparency in this case."

He blamed that partly on differences in U.S. and Japanese law but also on Elpida's representatives who "had to be dragged kicking and screaming into court even though they ultimately were seeking the court's approval of these transactions."

Elpida, Japan's last maker of dynamic random access memory (DRAM) chips, was undercut by falling chip sales and foreign competition.

Boise, Idaho-based Micron, which is losing money due to a crumbling PC industry, hopes the Elpida deal will create larger economies of scale.

The deal would catapult Micron into the No. 2 spot in the global market for DRAM chips, behind Samsung Electronics.

Micron's shares rose 8 cents or about 1 percent in early Thursday trading on Nasdaq to $7.75. The stock has rise about 43 percent since the Tokyo court approved the sale in early November.

The case is In re: Elpida Memory Inc, U.S. Bankruptcy Court for the District of Delaware, No. 12-10947

(Reporting by Tom Hals in Wilmington, Delaware; Editing by Bernadette Baum)

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