Powerchip Semiconductor Corp (力晶半導體), the nation's third-largest maker of computer memory chips, plans to raise US$450 million selling bonds this year to refinance its debt and fund expansion next year.
The company said it plans to sell global depositary receipts and bonds in Europe that are convertible into its stock. With a debt ratio of more than 100 percent and an unaudited NT$1.5 billion net loss last year, Powerchip may find it a tough sell.
"The company will find it hard to place a GDR this year," said Devan Kaloo, who has shares in Powerchip rival Samsung Electronics Co among the US$2.4 billion he helps manage for Aberdeen Asset Asia.
"Investors are scrutinizing companies' capital-raising more closely now, especially in technology," he said.
Powerchip was forced to halve a previous bond sale in December to US$90 million and scale back its expansion plans after its stock fell by half amid a slump in memory-chip prices.
"Several fund-raising activities are being planned in 2003," Powerchip president Brian Shieh (
The company last year became the world's third to open a new chip plant that makes silicon wafers more than twice as large as standard wafers. Powerchip said at the time that it wouldn't need to raise money to fund the US$4.3 billion plant because memory chip prices would improve, allowing the company to return to profit.
Instead, the company posted its second annual loss.
Powerchip said it plans to spend US$500 million this year, of which less than US$100 million would be for production equipment and the rest to pay off debt.
In the first two months this year, Powerchip's sales fell by 16.7 percent to NT$2.1 billion (US$60 million), according to monthly reports filed to the Taiwan Stock Exchange.
The company said last year it expected sales of about US$1.5 billion this year.
"It appears the company's confidence level in terms of generating internal cash flow this year is pretty low," said Chris Hsieh (謝偉民), an analyst with ING Securities Ltd.
Domestic memory-chip makers have high debt ratios, which could make borrowing money from banks difficult, Hsieh said. Banks expect companies with high debt to pay a premium to borrow more money, he said.
Powerchip had a total debt-to-equity ratio of 117 percent at the end of September, according to balance sheet data posted on its Web site, up from 70 percent at the end of 2001 and 18 percent the previous year.
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