Crucial 2012 Annual Report Download - page 55

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The trustees of the Elpida Companies submitted plans of reorganization to the court on August 21, 2012, which plans are
subject to court and creditor approval under applicable Japanese law. The Sponsor Agreement provides that the plans of
reorganization submitted by the trustees are to contain terms consistent with the provisions of the Sponsor Agreement.
Certain creditors of Elpida are challenging the proposed plan of reorganization submitted by the trustees and have
proposed an alternative plan of reorganization. An examiner appointed by the court has reviewed both plans and is currently
expected to make a recommendation to the court, on or about October 29, 2012, regarding whether to submit one or both plans
of reorganization to creditors for approval.
The consummation of the Sponsor Agreement is subject to various closing conditions, including but not limited to approval
by the Tokyo District Court, requisite creditor approval, receipt of approvals in bankruptcy proceedings in other jurisdictions
and receipt of regulatory approvals, including the People's Republic of China. The transaction is currently anticipated to close
in the first half of calendar 2013.
Rexchip Share Purchase Agreement
On July 2, 2012, we entered into a share purchase agreement with Powerchip and certain of its affiliates, under which we
will purchase approximately 714 million shares of Rexchip common stock, which represents approximately 24% of Rexchip's
outstanding common stock for approximately 10 billion New Taiwan dollars (or approximately $334 million). The
consummation of this share purchase agreement is subject to various closing conditions, including the closing of the
transactions contemplated by the Elpida Sponsor Agreement. At the closing of the Elpida Sponsor Agreement and the Rexchip
share purchase agreement, our aggregate beneficial ownership interest in Rexchip will approximate 89%.
Currency Hedging
Elpida Hedges: On July 2, 2012, we executed a series of separate currency exchange transactions pursuant to which we
purchased call options to buy 200 billion yen with a weighted-average strike price of 79.15 (yen per U.S. dollar). In addition,
to reduce the cost of these call options, we sold put options to sell 100 billion yen with a strike price of 83.32 and we sold call
options to buy 100 billion yen with a strike price of 75.57. The net cost of these call and put options, which expire on April 3,
2013, of $49 million is payable upon settlement. These currency options mitigate the risk of a strengthening yen for our yen-
denominated payments under the Sponsor Agreement while preserving some ability for us to benefit if the value of the yen
weakens relative to the U.S. dollar. These option contracts were not designated for hedge accounting and are remeasured at
fair value each period with gains and losses reflected in our results of operations.
Rexchip Hedges: On July 25, 2012, we executed a series of separate currency exchange transactions pursuant to which we
purchased call options to buy 10 billion New Taiwan dollars with a weighted-average strike price of 29.21 (New Taiwan dollar
per U.S. dollar). The cost of these options, which expire on April 2, 2013, of $3 million is payable upon settlement. These
currency options mitigate the risk of a strengthening New Taiwan dollar for our payments under the Rexchip share purchase
agreement. These option contracts were not designated for hedge accounting and are remeasured at fair value each period with
gains and losses reflected in our results of operations.
Japan Fabrication Facility
On June 2, 2011, we sold our wafer fabrication facility in Japan (the "Japan Fab") to Tower Semiconductor Ltd. ("Tower").
Under the arrangement, Tower paid $40 million in cash, approximately 1.3 million ordinary shares of Tower (subsequent to a 1
for 15 reverse stock split on August 6, 2012), and $20 million in installment payments, which we received in the second and
third quarters of 2012. The net carrying value of assets sold and liabilities transferred to Tower on the transaction date prior to
the effects of the transaction was $23 million and we recorded a gain of $54 million (net of transaction costs of $3 million) in
connection with the sale of the Japan Fab. We also recorded a tax provision of $74 million related to the gain on the sale and to
write down certain deferred tax assets associated with the Japan Fab. In connection with the sale of the Japan Fab, we entered
into a supply agreement for Tower to manufacture products for us in the facility through approximately May 2014.