Sat, Nov 19, 2011 page12

• Powerchip creditor banks mull deal

  DOUBLING DOWN: An official at Hua Nan Bank said that the creditor banks were likely to grant the company a new grace period, but would prefer a partial repayment of the debt

  • By Crystal Hsu / Staff Reporter
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  Memorychip maker Powerchip Technology Corp’s (力晶科技) creditor banks are mulling whether to extend the grace period for debt repayments a second time after the loss-making company made clear it is unable to make its payments scheduled for next month, bank executives said yesterday.

  The Hsinchu-based company, which aims to cut PC DRAM capacity to a maximum of 20 percent of total capacity next year in a bid to restructure, owes five syndicated loans valued at NT$46.6 billion (US$1.54 billion) held by most of the domestic and foreign banks in Taiwan, Cathay Financial Holding Co (國泰金控) spokesman Alan Lee (李偉正) said by telephone.

  Cathay Financial has exposure to Powerchip valued at more than NT$4 billion because both its banking and life insurance units took part in the syndicated loans, Lee said.

  Powerchip, whose losses widened to NT$6.66 billion in the third quarter, from NT$1.21 billion three months earlier, has requested another one-year grace period, Lee said.

  The company said it is unable to honor a debt payment of NT$10.6 billion due next month, although it has managed to pay interest regularly, Lee said.

  “We will reach a decision after discussing the matter with other creditor banks,” Lee said. “We hope Powerchip will provide more details about its proposed restructuring and concrete numbers about its shift from the ailing DRAM sector to the more profitable foundry business.”

  Hua Nan Commercial Bank (華南銀行), the flagship subsidiary of state-run Hua Nan Financial Holding Co (華南金控), which has lent Powerchip NT$3.73 billion, is organizing the meetings, with the first to be held on Monday.

  Hua Nan Bank executive vice president York Lai (賴明佑) said the creditor banks are inclined to grant the grace period, but would prefer a partial repayment of the debt.

  Hua Nan Bank has confidence in Powerchip, which has chipmaking orders from heavyweight customers, but faces a cash crunch that could drive it out of business, an unfavorable development for creditor banks, Lai said.

  “Powerchip is different from ProMOS Technologies Inc (茂德科技), which is asking banks to cancel its debts or convert them into company shares,” Lai said. “But neither can save ProMOS unless it can find a strategic partner.”

  However, Hua Nan Bank still plans to set aside more provision for loans to Powerchip, raising it to 10 percent of the total this month from the required 1 percent last month just to be prudent, Lai said.

  First Commercial Bank (第一銀行), the banking unit of First Financial Holding Co (第一金控) was even more cautious.

  First Bank increased the provision ratio to 20 percent of its NT$2.3 billion loan to Powerchip last month, spokesperson Lin Hann-chyi (林漢奇) said.

  “We will endorse whatever arrangement is best for both sides,” Lin said. “An extended grace period is better than an outright default, I guess.”

  Mega International Commercial Bank (兆豐國際商銀), the banking arm of Mega Financial Holdings Co (兆豐金控), was similarly pragmatic.

  The bank has lent NT$2.5 billion to Powerchip and intends to raise its provision ratio to 10 percent or higher as necessary at a later date, a bank executive said, asking that she not be named.
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