Wed, Jul 27, 2011 - Page 12 News List

ProMOS shares soar on new debt plan

RESCUE PROGRAM:The lossmaking chipmaker’s bank creditors have conditionally agreed to a partial debt-share swap and to lower the interest rate to 0.1 percent

By Crystal Hsu  /  Staff Reporter

ProMOS Technologies Inc (茂德科技) closed limit-up yesterday after its creditors voiced support a day earlier for a plan to convert part of its debt into shares if it could secure a strategic partner and fresh capital.

The rescue plan, which still needs approval by the boards of its bank creditors and the Financial Supervisory Commission, will make the lenders the largest shareholder in the lossmaking computer chipmaker.

ProMOS’ share price jumped 6.45 percent to NT$0.66, outpacing the TAIEX, which gained 1.28 percent, after its creditors agreed in principle on Monday to the debt conversion plan and cut the interest rate to 0.1 percent, from the current 3.5 percent.

SYNDICATED LOAN

The Hsinchu-based company owes NT$57 billion (US$1.98 billion) in a syndicated loan involving more than 20 state-run and private lenders led by the Bank of Taiwan (台灣銀行).

Liu Teng-cheng (劉燈城), chairman of Taiwan Cooperative Bank (合作金庫), which has lent ProMOS about NT$8 billion, said the banks gave conditional approval to the debt conversion plan, estimated to be worth between NT$20 billion and NT$28 billion.

The group also agreed to lower the interest rate to 0.1 percent, rather than 0.5 percent as previously suggested, to further ease the burden on the cash-strapped company, Liu said.

“The package hinges on the introduction of a new strategic partner on the part of ProMOS,” Liu said by telephone. “Talks of a bailout attempt would be meaningless otherwise.”

PARTNER

Local media have reported that Japanese memory chipmaker Elpida Memory Inc could top the short list of potential candidates since ProMOS supplies DRAM chips to Elpida in exchange for technological support.

The troubled company would not comment on the reports after announcing a plan earlier this month to reduce its capital by 85 percent.

The strategic partner would play the role of a financial investor and help ProMOS develop technologies and new products, ProMOS spokesperson Ben Tseng (曾邦助) said. The firm has rejected plans to sell its 12-inch fab or seek insolvency protection.

The company is scheduled to hold an extraordinary shareholders’ meeting on Aug. 26 to approve the financial restructuring program.

The capital reduction and debt conversion plans need regulatory approval as banking regulations prohibit lenders from holding more than a 5 percent stake in non-financial firms.

Jean Chiu (邱淑貞), deputy director-general of the commission’s banking bureau, said it would be premature for the regulator to form an opinion before ProMOS and its lenders had finalized a settlement plan.

“An exclusionary measure might not be necessary if ProMOS finds a strategic partner and significantly boost its capital level,” Chiu said by telephone. “The FSC had better wait and see how things unfold.”

ProMOS’ quarterly losses narrowed to NT$4.26 billion in the first quarter of this year, compared with losses of NT$4.75 billion in the fourth quarter of last year.

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