Epistar Corp (晶電), the nation’s largest LED chipmaker, announced yesterday it set a conversion price of NT$132.6 (US$4.57) for its latest five-year overseas convertible bond issuance, representing a 30-percent premium from Tuesday’s closing share price of NT$102.
Shares of Epistar closed at NT$103.5 yesterday on the Taiwan Stock Exchange, up 1.47 percent from the previous session. Over the past 12 months, the stock has dropped 4.61 percent, underperforming the TAIEX’s 10.15 percent rise over the same period, stock exchange data showed.
The company said in a stock exchange filing that it will start issuing the US$280 million zero--interest overseas convertible bonds on Thursday next week.
The potential share dilution is about 6.7 percent if investors exchange the whole of five-year notes for company stock this year, which Epistar said would have a limited impact on the interests of shareholders.
Proceeds from the issue, the third such undertaken by the Hsinchu-based company, will be used to purchase manufacturing equipment, especially metal--organic chemical vapor deposition equipment, to increase output and repay US dollar loans to lower interest spending, according to the statement.
“Epistar will use the proceeds to expand capacity. It plans to expand capacity by about 40 percent this year, with 25 percent planned for the first half of the year alone,” Primasia Securities Co said yesterday in a client note.
Barclays PLC is the lead manager of the convertible bond sales, with Horizon Securities Co (宏遠證券) serving as the main underwriter for domestic sales. Bank of New York Mellon Corp is trustee for the bondholders, according to the company’s filing.
Citing people familiar with the deal, the Chinese-language Economic Daily News said yesterday that the issue had been oversubscribed by more than 10 times the original size, reflecting strong interest from institutional investors and hedge funds.
Epistar on Jan. 7 reported unconsolidated sales of NT$1.44 billion for last month, up 13.98 percent year-on-year, but down 13.42 percent month-on-month because of worse-than-expected average selling price (ASP) erosion and worse product mix, Deutsche Bank said in a note on Jan. 10.
For the whole of last year, revenue totaled NT$19.77 billion, up 55.57 percent from a year ago, Epistar’s data showed. The company is expected to release its fourth-quarter results and offer its first-quarter guidance in March.
Primasia said it remained confident of the company delivering strong growth this year because of its leading position in terms of capacity and technology as well as strong intellectual property coverage.
“Epistar is working to improve its product mix by increasing the sales weight of high ASP/margin TV and lighting LEDs to 55 percent to 60 percent this year, up from 40 percent to 45 percent in 2010. This will help the company mitigate price competition pressure, especially in NB [notebooks] and handset LEDs,” Primasia said in the note.
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