More lenders sought for Plastics loan

Chiao Tung Bank Co (交通銀行) is seeking more lenders for up to NT$90 billion (US$2.7 billion) in a loan it is arranging for Formosa Plastics Group (台塑集團), bankers close to the transaction said.

The credit, Taiwan's biggest syndicated loan since 2000, is for a naphtha cracker project that will boost the group's production of chemicals such as polyvinyl chloride. Chiao Tung Bank is inviting lenders to a March 26 debt presentation, bankers said.

The loan will be made up of 10-year and seven-year portions with an interest margin of 70 to 80 basis points more than the Taiwan dollar money market rate, bankers said. The 90-day commercial paper primary rate is 1.15 percent and the secondary rate is 1.0267 percent.

A basis point is 0.01 percentage point.

"The group is looking at the mainland market where domestic supply falls short of demand," said Angela Hsiang, an analyst with KGI Securities Co (中信證券).

"Taiwan definitely can't be left out in the race to win this market where construction activities are booming."

Formosa Plastics Corp (台塑), a unit of the group, exports around 30 percent of its polyvinyl chloride, or PVC, to China, Hsiang said. PVC accounts for about 30 percent of the group's sales.

Formosa Plastics, Formosa Petrochemical Corp (台塑石化), Formosa Chemicals & Fibre Co (台灣化纖), Formosa Plasma Display Corp (台塑光電), Formosa Komatsu Silicon Corp (台灣小松電子) and Nan Ya Plastics Corp (南亞塑膠) will be the borrowers of the secured credit, bankers said.

Formosa Plastics Group officials declined to comment.

The loan will finance construction of the final stage of the No.6 Naphtha Cracker project at Mailiao on Taiwan's west coast, expected to be completed in 2005. Formosa Plastics said in May it will spend NT$125 billion on the final phase of the project.

In December, Taiwan Ratings Corp (中華信評), an affiliate of Standard & Poor's, raised the long-term debt ratings of Formosa Plastics Corp, Nan Ya, Formosa Chemicals and Formosa Petrochemical by one notch to twAA-, the fourth-highest level.

The changes was attributed to the expansion project.