Creditors of Mosel Vitelic Inc (
Mosel pledged part of its 37 percent stake in ProMOS as collateral against repayment of the bonds, which fell due last Friday, bondholders said. It is in talks with creditors to renegotiate payment terms.
Mosel shares fell by the 7 percent daily limit for the ninth consecutive session on the Taiwan stock exchange, a decline that has taken the stock's cumulative loss to 47 percent since the close on April 16.
ProMOS shares also fell by the daily limit and have dropped 21 percent over the same period.
"We have just two choices on what to do with the ProMOS shares: sell them directly on the open market, or look for a strategic company to buy them," said Frank Kuo (郭恭克), who counts Mosel bonds among the equivalent of US$3.3 billion in corporate debt he helps manage for Fubon Securities Investment Trust Co (富邦投信).
"There are other strategic companies that should be interested," he said.
Mosel vice president Thomas Chang (張東隆) and financial manager Susan Lin (林素貞) weren't available to return calls.
Mosel is talking to creditors about paying off part of the debt in cash and the rest in instalments. Its pledged ProMOS shares are currently worth 25 percent more than the debt, bondholders said.
ProMOS's current market capitalization is NT$22.5 billion, giving Mosel's 37 percent stake a value of NT$8.3 billion.
"We want to sell the stock before the price falls more,"Kuo said.
The next meeting between Mosel and creditors will not be held until May 28 because the law
requires the release of a statement one month prior to such a meeting, Kuo said.
The market value of Mosel's equity has sunk to NT$8.8 billion -- a third of its NT$26.6 billion outstanding debt at the end of the third quarter, the most recent period for which figures are available, according to the Taiwan stock exchange.
Mosel had NT$43.7 billion of assets at the end of the third quarter.
Investors have the right to ask Mosel to buy back an additional NT$1.6 billion debt that's convertible into its shares on May 21, according to Bloomberg Data.
Standard & Poor's has withdrawn its rating on Mosel's long-term debt. In November, S&P downgraded Mosel's rating to CCC+ from B-, both junk grade.
ProMOS is on course for its third consecutive year of losses after yesterday dumping its pretax profit forecast for this year and saying it now expects a NT$1.1 billion loss.
The chipmaker posted a NT$2.05 billion loss last year and a NT$6.1 billion loss in 2001.
The nation's five memory-chip makers are all facing losses this year after benchmark prices fell by two-thirds since November.
Prices of the most widely used memory chips had their steepest fall in two months last Thursday amid reports from traders that Mosel was dumping chips on the spot market to bolster its financial position.
``The company is in financial trouble,'' said Vincent Lai, who counts shares in domestic memory-chip makers among the equivalent of US$161 million he manages for HSBC Asset Management Taiwan.
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