Wed, May 28, 2003 - Page 10 News List

Mosel meets with creditors today

SURVIVAL BID The chipmaker is scheduled to present a new loan-repayment plan that it hopes will keep it from having to sell its shares in ProMos Technologies

By Bill Heaney  /  STAFF REPORTER

Troubled memory-chip maker, Mosel Vitelic Inc (茂矽), is scrambling to stop creditors from selling off its controlling stake in ProMOS Technologies Inc (茂德科技) after banks rejected a NT$4.7 billion loan-repayment plan.

The company is scheduled to meet with its creditors today to present a new repayment plan for the loan that fell due last month, but analysts were skeptical yesterday about Mosel's prospects for winning their cooperation.

"Right now the creditors are asking for at least 40 or 50 percent of the money," said Alfred Ying (應宗傑), an analyst at BNP Paribas in Taipei.

"I don't think Mosel can satisfy them. The only thing they can do is let ProMOS go," he said.

At the end of last month, Mosel asked its creditors to accept a 10-percent cash payment followed by 12 monthly installments to clear the NT$4.7 billion debt.

Mosel had put up a 22-percent stake in ProMOS as collateral on the loan.

Having rejected the initial repayment plan, creditors threatened to put the stake up for sale to recoup the debt. Officials at Mosel hope to avoid the sell-off with a new repayment plan today.

They will face a hostile crowd.

"Creditors were very unhappy with the initial repayment proposal," said Rick Hsu (徐禕成), a chip-industry analyst at Nomura International in Taipei.

"The key issue depends on how happy creditors will be with the new proposal. They'll only really be happy if Mosel pays back the loan," Hsu said.

Mosel's bottom line has suffered as a result of a year-long slide in the price of dynamic random access memory (DRAM) chips, which are used in products as diverse as computers and digital answering machines.

The combination of a slump in the global demand for memory chips as economies grind to a halt and an oversupply of the products as manufacturers open more efficient factories that pump out more chips at much lower cost has created what some analysts have called a "perfect storm" effect, sending prices plummeting to less than half last year's level.

Mosel's financial difficulties prevented the company from declaring last year's year-end and this year's first quarter fiscal results to the stock exchange before the end of last month, breaching the exchange's rules.

The company has been sus-pended from trading since May 8 after its stocks lost 60 percent of their value over a two-week period.

Local DRAM manufacturers are betting on a recovery in prices this year.

"ProMOS is bent on a DRAM recovery in the next six to nine months and profit from that will improve Mosel's financial position, but if its controlling stake in ProMOS is sold, it won't benefit," Ying said. "However, DRAM prices are very unlikely to recover in the next few months."

Mosel's troubles appear to be mounting, as another NT$2 billion comes due next month.

"The second debt is smaller, so if Mosel is able to satisfy its creditors on the first debt, then the second one should be more manageable," Hsu said.

"But the first issue is to pay back the debt due now and get rid of the creditors," he said.

Ying's crystal ball was much cloudier.

"There are no options I can see for Mosel to improve its position now," he said.

If creditors reject today's proposal, Mosel will lose its controlling stake in ProMOS and be left with a mere 15-percent interest in its only profitable venture.

Mosel's spokesman Thomas Chang (張東隆) did not return calls for comment yesterday afternoon.

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