Sat, Mar 05, 2005 page10

• THSRC pins its hopes on shares issue

  INVESTMENT The high-speed rail company, which is three months behind in its fundraising schedule, hopes to raise NT$15 billion by issuing preferred stock

  • By Wang Hsiao-wen / STAFF REPORTER
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  The Taiwan High Speed Rail Corp (THSRC, 台灣高鐵) yesterday announced plans to raise NT$15 billion (US$485.9 million) through sales of preferred stock this year to finance the railway project.

  At a shareholder conference held yesterday, the company's management won shareholders' consent to issue 1.5 billion preferred shares at a price of NT$9.30 per share this year.

  Holders of the preferred shares can keep their investment for only four years and are guaranteed an annual interest rate of 9.5 percent in the first two years. Although no interest will be paid for the last two years, the company promises to buy back the shares at the end of the fourth year at the issue price.

  Struggling with interest payments and a volatile capital market, THSRC has been relying heavily on preferred stocks to attract investors in recent years.

  In December 2003, the company planned to raise about NT$21.7 billion with its first issue of preferred stock, but by the end of last year about 43 percent of the 2.17 billion preferred shares remained unsold.

  The company, which is now three months behind its original fundraising schedule, hoped that the preferred shares would pull in about NT$15 billion -- 38 percent of the estimated NT$38.5 billion needed by the end of this year.

  According to its original plans, the company was supposed to collect NT$7.5 billion by last year, which would enable it to borrow triple the amount collected. But THSRC had only secured NT$1.5 billion by the deadline and asked for a three-month extension from its lenders. The delays in raising capital has put pressure on the tottering company, which has no choice but to plunge headlong into a more intense capital-increase timetable this year, analysts said.

  In its rescheduled timetable, the company plans to raise NT$6 billion by March and NT$7.5 billion by May. The company needs to pull in NT$12.5 billion by September and another NT$12.5 billion by December.

  THSRC chairwoman Nita Ing (殷琪) yesterday reiterated the company's determination to carry out its initial public offering plan as soon as the preferred stock is sold out.

  "Once all the preferred stock is sold out, we will become a listed company. This is the last time we will issue preferred stocks," Ing said.

  The company has no plan to list on the Taiwan Stock Exchange in the first half of this year, but Ing said she did not rule out the possibility of doing so in the second half of the year.

  "Entering the [stock] market has always been our goal, but we have to consider the situation in the capital market and choose a proper time," she said.

  Shares of THSRC yesterday traded at NT$8.55 in the emerging stock market (興櫃市場).

  As the high-speed railway project is not expected to become profitable until 2007, THSRC's plans to sell preferred shares sparked criticism from some shareholders. They said they were worried that there would be no dividends left for them if THSRC keeps doling out dividends to investors of preferred shares even before it starts making money.

  The company responded by saying that the sales of preferred stock would not damage the rights of regular shareholders.

  "We choose to raise money by selling preferred shares because it is more marketable and does little to dilute equity capital," THSRC's chief financial officer Lee Sheau-jin (李曉金) said.
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