Tuntex, Hualon struggle amid textile slump

Tuntex Distinct Corp (東雲紡織) said it is seeking court protection and Hualon Corp (華隆) asked for government help in creditor talks, as the Taiwanese textile makers struggle with a loss of orders to cheaper manufacturers in Southeast Asia.

Tuntex Distinct, the textile-making arm of Tuntex Group (東帝士集團), on Monday filed for court receivership -- a status that would give it time to reorganize while stopping creditors from calling in NT$29.3 billion (US$876 million) of loans to the company. Hualon asked Taiwan's Ministry of Finance to force banks to cut interest charges and extend repayment on NT$18.2 billion of its loans.

The two companies, which make textile fibers such as polyester, are struggling as garment makers and other customers shift production to Asian economies with lower wage costs compared with Taiwan, one of the most developed economies in the region.

Taiwanese textile makers' overseas orders fell 2.9 percent in the first four months to US$4.6 billion.

"Manufacturers in the downstream textile industry have mostly moved to China or Vietnam to help cut their production costs, so our client-base is shrinking dramatically," Hualon spokesman Chen Cheng-yen said. "We are still making monthly payments, though we want to ease that burden by cutting the interest rates."

Finance Ministry spokesman Jen Tai-sheng declined comment on Hualon, which said it wants government help in getting United World Chinese Commercial Bank (世華聯合銀行), Chiao Tung Bank (交通銀行) and Grand Commercial Bank (萬通銀行) to give it an extra year to repay its debt.

Tuntex Distinct creditors include China Development Industrial Bank (中華開發工銀), First Commercial Bank (第一商銀), International Commercial Bank of China (中國國際商銀), and Chiao Tung Bank.

Tuntex Distinct shares fell by their daily limit of 7 percent for a third consecutive day, to NT$0.86. Shares in Hualon, which wants creditors to reduce the average interest rate on its loans to 6 percent from 8 percent, fell by their 7 percent limit for the second day straight, falling NT$0.11 to NT$1.48 a share.

"The irreversible trend is that Taiwan will continue losing its labor-intensive industries to China and Southeast Asian countries," said President Securities Corp (統一證券) Chief Economist Vickie Hsieh.

Tuntex, in a statement distributed by the Taiwan Stock Exchange, said it was seeking court protection and blamed a fire at its headquarters last week for the "difficulty to sustain its operation." The fire damaged three of four buildings at the Eastern Science Park complex (東方科學園區), owned by the Tuntex Group, which has investments in textiles, petrochemicals, and property. Tuntex Distinct officials could not be reached for comment as the blaze destroyed the telephone switchboard and offices.

Hualon may be able to win government assistance in debt talks with its bankers. Under Ministry of Finance guidelines, qualified applicants are entitled to a six-month grace period on maturing debt while existing credit lines will be maintained, regardless of their actual financial status.

At the end of the quarter to March 31, NT$842.3 billion or 5.89 percent of total outstanding credits extended by domestic banks were non-performing, according to the central bank.

Another NT$465.5 billion of loans, or 3.25 percent of loans, may also turn bad and are "under surveillance," the bank said.