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Sat, Mar 16, 2002 - Page 18 News List

1.8% of UMC sold for US$440Mn

SOLD ON THE US MARKET The government sold American depositary receipts of the world's second-largest maker of chips for other companies, for US$9.25 each

BLOOMBERG , TAIPEI

Taiwan sold 1.8 percent of United Microelectronics Corp (UMC, 聯電) for US$440 million, the first such sale since the company's US debut in September 2000, documents said.

The government sold American depositary receipts of the world's second-largest foundry, or maker of chips for other companies, for US$9.25 each, according to listing documents. That's a 5.1 percent discount to Wednesday's closing price for the ADRs.

Investors placed orders for twice the number offered, a banker involved in the sale said.

Lehman Brothers Inc managed the sale, helped by ABN Amro Holding NV and Morgan Stanley Dean Witter & Co.

"The sale highlights renewed optimism about foundries," said Yvonne Leung, a technology-investments manager at Towry Law (Asia) Ltd and owner of UMC shares. "It's also good for Taiwan if the government reduces its interference in the market."

Proceeds of the sale will help counter a NT$80.7 billion (US$2.3 billion) revenue drop in Taiwan's 2002 budget.

More electronics companies are hiring UMC to make chips used in products such as mobile phones and computers. UMC said earlier this week it will be using 70 percent of its machinery by the end of June, up from 35 percent last year.

Each of the 47.5 million ADRs sold represents five ordinary shares. The National Stabilization Fund (國安基金), a state-run share-buying body set up to support Taiwan's stock market, held the stock backing the ADRs.

By selling ADRs, which have enjoyed an average 32 percent premium to the underlying shares for the past 12 months, the government can take a bigger profit on shares it bought.

ADRs of some Taiwanese companies trade at premiums to the underlying shares because the nation's government restricts overseas investment in shares sold on the domestic market.

In related news, UMC had its credit rating cut one notch to "BBB" by Standard & Poor's, which said earnings of the chipmaker probably won't rebound soon because of a drop in sales to telecommunications companies.

US-based rating service Standard & Poor's gave the chipmaker a stable credit outlook because of the company's efforts to return to profit by selling idle capacity.

The "BBB" designation, one level higher than Standard & Poor's lowest investment-grade credit rating, means that it will be more difficult for UMC to raise funds by selling debt overseas.

"UMC's operating performance is not likely to return to levels consistent with the previous rating on the company over the medium term," S&P Associate Director Tony Tsai (蔡東松) said in a statement.

The chipmaker has seen its operating performance fast declined in recent months "in terms of revenue growth, capacity utilization, average selling price, and profit margins," it said.

UMC's total revenues aggregated around NT$64.5 billion (US$1.84 billion) in fiscal 2001, down 39 percent from NT$105 billion in 2000. The company posted a net loss of NT$3.1 billion in 2001 compared with a net profit of NT$50.7 billion in the previous year.

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