Flash memory maker Spansion files for bankruptcy

Struggling flash memory maker Spansion Inc. and its US subsidiaries filed for Chapter 11 bankruptcy protection Sunday, in an effort to restructure $625 million worth of debt as the company continues to explore a possible sale or other alternatives. The company listed debt of $2.4 billion and assets of $3.8 billion as of the end of the third quarter of 2008 in Chapter 11 documents filed yesterday in US Bankruptcy Court in Wilmington, Delaware.

The news comes a week after Spansion, one of the world's largest makers of chips used in digital cameras, cell phones and high-definition televisions, said it would slash its global work force by 35 per cent, or 3,000 employees.

Spansion said Sunday it decided to file for bankruptcy following consultation with a lender group holding the company's senior secured floating rate notes due in 2013. The company is in talks with the bondholder group about providing debtor-in-possession financing for its long-term cash needs.

Spansion's biggest creditors listed include US Bank NA and Wilmington Trust, owed $457 million for notes and debentures due in 2016; Fidelity Management & Research Co., owed $69 million for notes and debentures due in 2016; Chipmos Technologies Ltd, owed $57.7 million; TEL U.S. Holdings, owed $49.4 million; and AIG Global Investment Group Inc., owed $33.8 million for notes and debentures due in 2016.

"Given our focus on Spansion's future, management and the board have concluded that Chapter 11 provides the most effective means for Spansion to preserve its business, meet its post-petition obligations, and maintain customer confidence and continuity while we complete this restructuring," said recently appointed president and CEO John Kispert. "At the same time, we will continue to explore opportunities for a strategic transaction to ensure that we are doing all we can to maximise value for our stakeholders."

Sunnyvale, California-based Spansion, founded in 1993, was a joint venture between chipmaker Advanced Micro Devices Inc. and Fujitsu Ltd. In January, Spansion said it would restructure its balance sheet and seek a sale or merger. Earlier this month Spansion's Japanese unit filed for bankruptcy, and Taiwan-based ChipMOS, a provider of chip testing and assembly services, terminated its contract with Spansion LLC over the company's default on $29 million out of $73 million in trade debt.

Spansion, and its US units - Spansion LLC, Spansion Technology LLC, Spansion International, Inc. and Cerium Laboratories LLC - filed their voluntary petitions in Delaware bankruptcy court. Spansion said the filings constitute defaulting on its debt. The company said it plans to realign its business to focus on flash memory products, Internet Protocol services and the profitable parts of its wireless segment going forward.

"With our valuable portfolio of industry-leading products and technology, we believe that Spansion has a promising future," Kispert said. "By focusing on embedded Flash memory products, intellectual property solutions, and the profitable portions of the wireless segment, we believe that Spansion can leverage its diverse product portfolio and customer relationships while we continue our restructuring process and explore opportunities for a strategic transaction."

Spansion shares have been steadily declining over the past three years, peaking in the mid-double-digit range in 2006 but falling to $3.70 by last spring. The stock has fallen 99 percent since reaching its 52-week high and closed at five cents on Friday.