Thu, Jan 12, 2012 - Page 12 News List

MOEA helping Chimei roll over debt

SHORT-TERM HELP:The ministry said Chimei Innolux’s repayment of its debt for the next two years would result in a cash-flow shortage for material purchases

By Jason Tan  /  Staff Reporter

The Ministry of Economic Affairs (MOEA) is assisting Chimei Innolux Corp (奇美電子), the world’s No. 3 LCD maker, in rolling over the company’s NT$5 billion (US$168 million) short-term loan with banks.

Local media reported yesterday that creditor banks are likely to allow Chimei to pay interest only instead of the principle because of the government’s support.

The Industrial Development Bureau said on Tuesday it had sent official documents to the creditors to lobby for a new debt arrangement for Chimei Innolux over the loan repayment.

The bureau said it is suggesting that the banks offer Chimei the option of paying interest first and to allow a buffer time of six months to one year for a full loan repayment.

According to bureau Director-General Woody Duh (杜紫軍), the government is supporting Chimei given the panel maker is still sustainable in its operations.

He said most of Chimei’s debt repayment — reportedly totaling NT$24 billion — falls in this year and next, therefore a one-off repayment would incur an immediate cash-flow shortage for material purchases.

Despite government support, Chimei still has to gather consent from at least a third of the banks, which are expected to convene a meeting soon to review the application, Duh said.

The LCD industry has been hit hard by falling panel prices on sluggish demand from the US and Europe, with Taiwan’s top two makers — Chimei and AU Optronics Corp (友達光電) — posting big losses in the third quarter.

Competition is intense from bigger South Korean rivals Samsung Electronics Co and LG Display Co.

Chimei Innolux posted a net loss of NT$44.45 billion in the first three quarters of last year. Its full-year sales of NT$501.14 billion, however, were up 4.4 percent year-on-year.

The government said in November last year it was mulling tapping the state-backed National Development Fund to promote greater integration among high-tech industries struggling with a global slowdown, including the solar and flat-panel sectors.

Duh yesterday told reporters that pushing for a merger between Chimei and AU Optronics was not a viable option at the moment.

This is because consolidation of the two would create a monopoly in the LCD industry and antitrust concerns could emerge in other markets, he said. Chances were low especially given AU Optronics is currently embroiled in a similar lawsuit in the US, he added.

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