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Chunghwa announces sale of bonds

Chunghwa Picture Tubes Ltd (中華映管) announced yesterday that US private equity firm Warburg Pincus LLC has agreed to buy NT$8.27 billion (US$250 million) in convertible bonds in the company through a private placement.

Warburg Pincus will purchase the bonds of Chunghwa Picture, the nation's third-largest liquid-crystal-display (LCD) panel make, via two wholly-owned investment arms, Bright Display Holdings Ltd and Great Display Holdings Ltd, Chunghwa Picture said in a filing with the Taiwan Stock Exchange yesterday.

The six-year bonds issued by Chunghwa Picture can be converted at NT$8.5 per share, the filing said. The bonds, if all are converted, would account for 10.2 percent of the flat-panel maker's common shares, it said.

Shares of Chunghwa Picture closed at NT$8.17 on Friday in Taipei. Stock has increased 15.73 percent so far this year.

"We are excited to have Warburg Pincus as our long-term partner. Warburg Pincus' commitment to the investment demonstrates its confidence in Chunghwa Picture's prospects, as well as its business strategy," company chairman Lin Wei-shan (林蔚山) said in a statement.

Chunghwa Picture intends to leverage Warburg Pincus' global network and financial management expertise to further enhance its business, the statement said.

"We are committed to assist Chunghwa Picture's management as it executes its focused business strategy. We look forward to a mutually beneficial relationship that will further enhance Chunghwa Picture's position in the industry," Rajiv Ghatalia, managing director of Warburg Pincus, said in the statement.

Warburg Pincus has a variety of investments in its portfolio, including telecommunications, high technology companies and media enterprises. Its latest investment in the LCD sector is expected to boost Chunghwa Picture's business at a time when the flat-panel maker has swung into the black after incurring losses for five consecutive quarters.

On the back of higher panel prices, Chunghwa Picture posted a second-quarter net income of NT$504 million, its first quarterly profits since the fourth quarter of 2005. The figure compares to a net loss of NT$5.78 billion in the second quarter last year and NT$3.07 billion in the first quarter.

By integrating upstream raw materials and downstream manufacturing, as well as enhancing operation efficiency, the company may be able to see net income top NT$2 billion per month in the next half of the year, Lin told an investor conference at the end of July.

Chunghwa Picture reported record-high consolidated revenue of NT$15.62 billion last month, a 41.9 percent jump from a year ago on record-high shipments.

The investment by Warburg Pincus is subject to certain conditions, including approval by Chunghwa Picture's shareholders. The company said it would hold an extraordinary shareholder meeting on Nov. 19 to review the deal.

The investment is expected to be passed with the support of major shareholders such as Tatung Co (大同), the filing said.
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