Thu, Dec 01, 2011 - Page 12 News List

Powerchip drops in trading despite recent debt deal

DEBT CUT:An official said Powerchip’s creditor banks agreed to a deal that will see the cash-strapped firm pay back only 10 percent of five syndicated loans

By Crystal Hsu and Lisa Wang  /  Staff Reporters

The share price of memorychip maker Powerchip Technology Corp (力晶科技) closed down by the daily limit yesterday even though the company’s creditor banks agreed a day earlier to a debt repayment plan to help prevent the risk of an immediate default.

The share price of cash-strapped Powerchip plunged 6.25 percent to NT$1.05 in Taipei trading, exceeding the TAIEX’s 1.21 percent fall, Taiwan Stock Exchange data showed.

The drop came after Powerchip’s 42 creditor banks reached an agreement on Tuesday to extend the grace period and arrange for other repayment options after the Hsinchu-based company asked for help.

“Under the arrangement, Powerchip needs only to repay 10 percent of five syndicated loans,” totaling NT$46.6 billion [US$1.54 billion] next year, an official from state-run Hua Nan Commercial Bank (華南銀行) said on condition of anonymity.

The official added that the payments would start in March.

Powerchip has come under rising financial pressure amid falling DRAM chip prices. The company’s five syndicated loans are scheduled to mature at different periods of time, with NT$18.54 billion expected to be due later this month.

Hua Nan Bank, Powerchip’s largest creditor, was responsible for organizing the debt repayment meetings. The creditor banks were willing to accommodate Powerchip because the firm has managed to pay interest payments averaging from 2.3 percent to 2.9 percent of the five loans, the official said.

The chipmaker must repay 10 percent of the principle of the loan, or NT$1.85 billion, between March and November next year, the official said.

Powerchip spokesperson Eric Tang (譚仲民) said yesterday that the creditor banks’ request was “realistic” and that the company would “do [its] best to live up to their expectation.”

“We have a good chance to fulfill this [principal] repayment scheme. The company’s [financial] situation will improve since we expect the market situation will be better,” Tang said via telephone.

In the first nine months of this year, Powerchip lost NT$13.26 billion because of the persistent decline in DRAM prices, compared with NT$12.21 billion in net profit a year earlier.

To avoid more losses, the company has shifted a large part of its capacity from standard DRAM production to foundry operations and NAND flash memory manufacturing, which are more profitable.

Powerchip is also considering the sale of a 12 inch factory to help pay back its debts, Tang said last week, adding that the sale would not adversely affect the firm’s production transition strategy.

Powerchip has hired an international consultancy company to help with the sale of the 12 inch factory. Creditor banks are believed to be needed to refrain from attaching terms to the sale to avoid scaring away potential buyers, the Hua Nan official said.

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