Tue, Nov 30, 2004 - Page 11 News List

AU Optronics Corp raises US$154 million bank loan

OUTPUT The world's third-largest LCD maker raised the money from 13 banks to increase production and to reduce the cost per unit, as demand is expected to rise

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AU Optronics Corp (友達光電), the world's third-largest maker of liquid-crystal displays (LCDs) for televisions, raised a US$154 million loan from 13 banks to boost production, said Citigroup Inc, which is arranging the credit.

The Hsinchu-based company is increasing output to reduce unit costs amid falling LCD prices.

Flat-panel prices in the US$36 billion industry, dominated by Samsung Electronics Co and LG Philips LCD Co of South Korea, have tumbled by more than a third since the middle of the year after 18 months of gains.

Banks offered AU Optronics a third more than it sought for the loan, which it's using to increase production in China.

Demand for flat-panel computer monitors is expected to rise 40 percent to 95 million units next year and that for televisions could double to 16 million, said Eric Lin, an analyst at Yuanta Core Pacific Securities (元大京華證券) in Taipei.

Flat-panel display makers in Taiwan raised a record NT$350 billion (US$10.9 billion) from equity and debt markets this year to make more screens, NT$150 billion more than last year, Lin said.

AU's loan includes a five-year US$54 million portion with an interest margin of 0.6 percentage points more than the London interbank offered rate. The remainder is an 830 million-yuan (US$100 million) portion with interest at 90 percent of China's three-year and five-year lending rates.

Three-month Libor is 2.40 percent. Three-year yuan lending rate was last at 5.76 percent.

The facility is the first time Bayerische Landesbank, Banca Intesa SpA and Nanyang Commercial Bank Ltd have lent to AU, according to Citigroup.

Other lenders include BOC Hong Kong Holdings Ltd, Calyon, Agricultural Bank of China, Bank of China, Bank of Communications Ltd, Bank of East Asia Ltd, Bank of Tokyo-Mitsubishi Ltd, Industrial & Commercial Bank of China and DBS Group Holdings Ltd.

AU is scheduled to sign the loan tomorrow in Suzhou, northwest of Shanghai, where its China plant is located.

Screen suppliers are vying for bigger market share by making more screens to help pare unit cost, analysts said.

"Each player has only one way to go and that is to build bigger and better facilities, which will add to the oversupply problem," said Macquarie Research Equities analyst Nicholas Teo in Taipei. "It's a vicious cycle."

Macquarie Research doesn't expect panel prices to stabilize until the second half of next year.

AU's third-quarter profit fell to NT$4.1 billion from NT$5 billion a year earlier on falling screen prices. Selling prices may fall about 5 percent in the fourth quarter from the third quarter, the company said on Oct. 27.

The company in June signed a seven-year NT$60 billion loan which was increased from NT$45 billion after banks offered to lend the company more than it sought. It used the loan to help fund a NT$90 billion expansion project in central Taiwan.

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