Banks demand Chi Mei Lighting repay billions

By Crystal Hsu, Lisa Wang and Helen Ku  /  Staff reporters

Wed, Aug 07, 2013 - Page 13

A group of banks yesterday said LED chip manufacturer Chi Mei Lighting Technology Corp (奇力光電) must repay up to NT$6 billion (US$200 million) in loans, but the company’s major shareholders have responded that they do not have any obligation to cover the troubled firm’s debts.

The state-run First Commercial Bank (第一銀行) — the primary lender of syndicated loans valued at between NT$5.6 billion and NT$6 billion made to Chi Mei Lighting — called on shareholders Chi Mei Corp (奇美實業) and Innolux Corp (群創光電) to assume responsibility for the outstanding payments and talk to the banks.

“The creditor banks will be extra cautious in dealing with the shareholders and their affiliated companies, if they opt to wash their hands of the situation,” First Bank executive vice president Lin Hann-chyi (林漢奇) said by telephone.

While the creditor banks hold collateral for the loans, they are not in a good position to find buyers for Chi Mei Lighting’s factories or capital equipment, Lin said.

First Bank, Mega International Commercial Bank (兆豐國際商銀) and other lenders have placed the struggling LED chipmaker on their “to watch” list and increased provisions after the company filed for loan extensions last year, he said.

Chi Mei Lighting must settle all its debts by December 2015, Lin said. However, even if it does default on the loans this will have limited impact on First Bank because of the modest size of the payment owed, which is estimated at NT$800 million, he added.

Lin’s remarks came after the Greater Tainan-based chipmaker said in a filing to the Taiwan Stock Exchange on July 26 that all of its board directors, including chairman Chen Ling (陳領), had left the company for “personal reasons” or were made to leave because they were not fulfilling their duties.

Chi Mei Lighting did not give further explanations for the executives’ exodus.

In response to the banks’ calls for negotiation, Innolux, the world’s fourth-largest LCD panel maker, yesterday said it has no intention to lead the formation of a new Chi Mei Lighting board.

Innolux and one of its subsidiaries own a combined 40 percent stake in Chi Mei Lighting.

An Innolux public relations official said the company has been phasing out its LED business over the past three years, as Taiwanese LED firms are losing their competitive edge to Chinese rivals, which is why the company decided not to subscribe to the new shares Chi Mei Lighting offered earlier this year.

In June, Chi Mei Lighting announced that it would scrap its plan to issue new shares, citing “volatile LED chip prices triggered by unfavorable domestic and external economic conditions,” according to a filing issued on June 26.

Earlier yesterday, Innolux spokesman Lin Chen-hui (林振輝) said that as it is only a Chi Mei Lighting shareholder, it has nothing to do with the chipmaker’s day-to-day management.

“We will respect creditor banks’ decisions to sell off the company’s assets to recover their money,” Lin was quoted as saying by cable TV network UBN.

On Monday, Chi Mei Corp, which owns a 60 percent stake in the LED firms, had also said that as it is just a shareholder, it does not bear any responsibility to repay Chi Mei Lighting’s debt, the Chinese-language United Daily News reported.

Founded in 2006, Chi Mei Lighting has more than NT$2 billion in paid-in capital. The company has manufacturing plants in China’s Guangdong Province and employs more than 1,500 workers in Taiwan and China, according to the company’s Web site.