Tue, May 06, 2003 - Page 10 News List

Mosel facing TAIEX suspension

IN TROUBLE The memory chip maker has failed to file results for last year or this year's first quarter and is trying to get its creditors to reschedule billions in debt

By Bill Heaney  /  STAFF REPORTER

Financial problems at computer memory chip maker Mosel Vitelic Inc (茂矽電子) may lead to the company being suspended from trading on the Taiwan Stock Exchange.

Mosel broke stock exchange rules by not reporting its full-year financial results for last year or its first-quarter results for this year before an April 30 deadline because of "recent changes in accounting staff" and "incomplete merger plans for its subsidiaries," the company said in a statement to the TAIEX yesterday.

Last week Mosel asked its creditors to reschedule a NT$5 billion debt repayment come due, changing it to a 10-percent cash payment now followed by 12 monthly installments. Creditors rejected the request, a Mosel spokesperson said yesterday.

The Taiwan Stock Exchange Corp's (證交所) watchdog, the Securities and Futures Commission, then rejected Mosel's request to delay reporting its results while it tried to find a solution to its debt burden. The commission will meet within the next two weeks to confirm Mosel's suspension from trading, an exchange official surnamed Lin told the Taipei Times yesterday.

DRAM prices have fallen dramatically in recent months, with the most popular 256-megabit double data rate chip now worth only a third of its value of November last year, closing at an average of US$3.25 yesterday on a Taiwan-based memory-chip clearing house, Dramexchange.com.

"This is a lousy industry," said Eldon Pei, a memory industry analyst at Deutsche Bank in Taipei. "[DRAM] companies are just not making much money."

Taiwan has five major DRAM makers who compete head-to-head with two government-subsidized conglomerates in South Korea -- Hynix Semiconductor Inc and Samsung Electronics Co. All seven companies have increased production, but demand for the chips that are used in devices as diverse as personal computers, answer machines and computer printers has fallen, leading to the price slump.

Two of the companies, Taiwan's Nanya Technology Corp (南亞科技) and Korea's Samsung, turned a profit last year. Only Samsung is expected to make money this year.

A suspension from trading on the TAIEX may give Mosel and its investors a chance come up with a survival strategy.

Mosel's stock has lost 57 percent of its value over the past 12 days of trading, falling a further 6.6 percent, or NT$0.14, to close at NT$1.97 yesterday. The company's vice-president and spokesperson Thomas Chang (張東隆) was unavailable for comment yesterday afternoon, but told Bloomberg News earlier in the day, "Mosel is falling like a rock, so shareholders might actually be better off if the stock is suspended."

As early as March 25, Standard & Poor's withdrew its corporate credit rating for Mosel. In August last year, Mosel revised down its forecast for 2002 earnings from NT$20.4 billion to NT$12.4 billion, citing falling DRAM prices. The company expected to make a pre-tax loss of NT$5.9 billion at that time. It has offered no further earnings guidance since then.

Analysts welcomed Mosel's suspension from the TAIEX.

"It's a good idea to suspend trading," said Chris Hsieh (謝偉民), chief researcher at ING Securities Ltd in Taipei. "Mosel's ability to repay its debts is a major concern for investors."

Investors can now decide whether to put Mosel's collateral -- 22 percent of a 37 percent stake in Taiwan's second largest DRAM maker ProMOS Technologies Inc (茂德科技) -- up for sale. The move would effectively bankrupt the company. An alternative would be to wait for Mosel to sell a further 15 percent stake in ProMOS that is not tied to any debt.

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