Ta Chong Bank (大眾銀行), whose board last month approved cash injection plans by a Carlyle Group-led consortium, may delay an original plan to elect new board members if its recapitalization proposal fails to gain regulatory approval, a filing to the stock exchange showed.
The news prompted market concerns over the Kaohsiung-based bank's attempt to woo fresh funds from the Carlyle-led consortium as it aims to enhance its financial structure and operational competitiveness. The lender yesterday dismissed such worries.
Shares of Ta Chong, the nation's fifth-biggest cash card issuer by lending balance, dropped NT$0.25, or 2 percent, to close at NT$12.25 on the Taiwan Stock Exchange, compared to a 0.11 percent decline in the benchmark TAIEX.
Ta Chong has seen its stock decline by 7.9 percent since this year's high of NT$13.3 on July 12 but overall it has risen by 8.89 percent so far this year.
Ta Chong spokesman and executive vice president James Chiou (邱正光) said the board election may not occur on Oct. 31 if Zhong Xi (眾希), a financial services company set up by Carlyle as a local investment vehicle, cannot gain regulatory approval for its cash injection plans by Oct. 29.
The bank is scheduled to hold an extraordinary shareholder meeting on Oct. 31 to approve the cash injection plans by Zhong Xi and another financial services firm Xiong He (雄賀), which are each invested in by Carlyle and private equity fund Corsair Capital LLC.
Chiou said the bank will hold an ad hoc board meeting the next day after both Zhong Xi and Xiong He clear regulatory screening to decide the new date for the extraordinary shareholder meeting.
However, he dismissed market speculation that the bank's recapitalization plans would eventually fail.
"It's a matter of timing [for the regulatory approval of the cash injection plans]. We don't think there's any problem associated with the recapitalization," he said in a telephone interview yesterday.
Chiou also denied a local newspaper report saying that the possible delaying of the board election was related to concerns by some government agencies.
"As far as we know, both the Financial Supervisory Commission and the Investment Commission are not particularly concerned about the funding sources of the Carlyle-led consortium," he said.
The Chinese-language Commercial Times reported yesterday that the private placement led by the Carlyle Group is still waiting for regulatory approval because the US consortium appears not to be using their own money but obtaining loans from local banks for the investment.
Calls to Susan Chang (張秀蓮), spokeswoman and vice chairwoman of the Financial Supervisory Commission, to seek comment on whether the commission is worried about Carlyle's funding were not answered yesterday.
Her secretary said Chang was busy in meetings.
Ta Chong first unveiled the possibility of a delay to the board election in a filing it submitted to the local stock exchange late on Thursday night.
In the filing, the lender said it also agreed for Zhong Xi and Xiong He to re-negotiate the portions each would subscribe to new securities issued by Ta Chong.
The board on Sept. 12 approved a private placement by issuing convertible debentures, common shares and preferred shares worth NT$21.5 billion (US$659.6 million) to the two financial services firms in exchange for a stake of between 36 percent and 40 percent in the bank.
The bank originally expected to obtain NT$15.5 billion of new funds by Oct. 31, if the regulatory review process and the new securities subscription went as smoothly as expected, Chuang Ya-ping (莊雅評), a senior manager at the bank, said on Sept. 13.
The remaining NT$6 billion is likely to come in some time in November, he said at the time.
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