Shares of debt-ridden ProMOS Technologies Inc (茂德科技) rallied near the 7 percent daily limit yesterday on an ambiguous remark by a government official that credit banks could grant new loans to help the computer memory chipmaker pay off debt that is due on Tuesday.
Stocks of ProMOS jumped 6.76 percent to NT$1.58 at the close of Taipei trading after Minister of Economic Affairs Yiin Chii-ming (尹啟銘) hinted that the chipmaker’s credit banks may support NT$5 billion (US$146.9 million) in syndicated loans.
“ProMOS should have a good Valentine’s Day,” Yiin said yesterday morning in response to media queries on the current state of the company.
Without further elaboration, investors took Yiin’s remark as a positive sign that a bank consortium led by Bank of Taiwan (臺灣銀行) would give the green light to the NT$5 billion loan to the cash-strapped dynamic random access memory (DRAM) company.
ProMOS is seeking the much-needed cash to repay US$330 million in European convertible bonds (ECBs) as bond holders will be able to exercise their right to sell them back to the chipmakers 24 months following their issuance on Feb. 14, 2007, over seven trading days beginning on Tuesday.
ECB
ECBs are bonds that can be converted into a pre-determined number of company shares at pre-set times, issued by a company outside its country of operation. Since there are two currencies involved in this hybrid security, in addition to the conversion option, there is also an embedded currency option.
The Hsinchu-based manufacturer of DRAM chips, however, said in a company filing to the Taiwan Stock Exchange yesterday that it had not been notified of any bank loan approvals, and that although it is in constant communication with these banks, ProMOS was not invited to sit in on internal discussions on Thursday night.
“Our financial staff is still in intensive talks with related parties. And we hope to solve the problem before the [corporate bond] defaults,” ProMOS spokesman Ben Tseng (曾邦助) told the Taipei Times by telephone.
ProMOS still has some leeway to raise cash, as it would not have to make the payment until Feb. 26, primarily because of holidays, Tseng said.
Moreover, representatives at Bank of Taiwan (臺灣銀行) also told the Taipei Times yesterday that no decision has been made on the matter, although a Chinese-language newspaper reported earlier yesterday that eight domestic banks with government stakes already gave their nod to the syndicated loan.
Attendants at the meeting, convened by the state-owned Bank of Taiwan, reportedly concluded that there was no need to rush as they could divide the loan and address other details in the following week, the Commercial Times said, without citing any source.
The other lenders include Land Bank of Taiwan (土地銀行), First Commercial Bank (第一銀行), Hua Nan Commercial Bank (華南銀行), Taiwan Business Bank (台灣企銀), Chang Hwa Commercial Bank (彰化銀行), Export-Import Bank of the Republic of China (中國輸出入銀行) and Taiwan Cooperative Bank (合庫金庫銀行).
The paper quoted officials from the credit banks as saying that they would also postpone redeeming ProMOS bonds at the company’s request.
But Yiin dismissed his earlier remark yesterday evening, saying it had nothing to do with the bank loan ProMOS is looking for.
“The government’s bailout plans are based on consideration of the whole industry and the government won’t interfere in individual cases,” Yiin said in a statement posted on the ministry’s Web site. “As for whether banks will continue offering loans to ProMOS, it is a commercial matter between private companies and banks that the government finds hard to step into.”
In a media briefing on Wednesday, Yiin said: “All we [the ministry] can do is request banks extend loan repayment dates or improve lending terms, but the government cannot help individual companies repay their debts to bondholders.”
“Doing so would make a terrible precedent to the public,” Yiin said.
Yiin yesterday reiterated that the government would make public its final and concrete industry consolidation plans by the end of this month, the statement said.
INSOLVENCY
An analyst said the NT$5 billion loan was crucial for ProMOS to avoid immediate insolvency.
“However, the amount is not enough for the company to pay off the debt,” Liu Szu-liang (劉思良), a chip industry analyst with Yuanta Securities (元大證券), said in a telephone interview yesterday.
With the new cash, ProMOS may be in a better position to persuade its bondholders to extend the payments, or to accept the payment in several installments, Liu said.
He said bondholder approval was highly likely as they could get higher returns after ProMOS improves its financial situation and operations.
On Thursday, the Financial Supervisory Commission (FSC) said ProMOS’ stock could be downgraded to the full-cash delivery class if it defaults on buying back its convertible bonds.
FSC Chief Secretary Lu Ting-chieh (盧廷劼) told a press conference that the predicament plaguing ProMOS was so deep and complicated that no government agency could handle it singlehandedly.
Lu said the company and its major shareholders should also draw up plans to help themselves, rather than count a bank bailout.
Meanwhile, ProMOS issued another statement on the Taiwan Stock Exchange, confirming the redemption date on Tuesday.
The original redemption date was today.
With the upcoming US President’s day on Monday, the first day for redemption is on Tuesday.
ECBs have a seven-day settlement after trade date, which means the company would not default until Feb. 26.
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