Taiwan passive component makers rushing to issue ECBS for new capital

Taipei, Dec. 18, 2003 (CENS)--Three major makers of passive components in Taiwan are raising total new capital of US$195 million by issuing exchangeable corporate bonds abroad to support their expansion projects to cash in on the bright business prospects.

The three major passive component makers are Yageo Corp., Luxon Electronics Corp. and Walsin Technology Corp. The first two have completed their capital-raising projects by issuing Euro-Convertible Bonds (ECBs) and Walsin's ECB-issuance project was just okayed by the Securities and Futures Commission (SFC) under the Ministry of Finance last week.

Underwent a sluggish demand in the past three years, passive component makers finally seeing a light of business recovery recently. Both Yageo and Walsin Technology currently enjoy a over-90% equipment utilization ratio and their businesses in the first quarter next year, a traditional off season, are expected to maintain at the same level as that in this quarter, a traditional peak.

With a brighter industry prospect, the major passive component makers have continuously started fund-raising projects while the investors also have stronger willingness to pour money into the recovering line.

In middle last month, Walsin Technology's board resolved to issue under-US$40 million worth of ECBs and the fund-raising project was okayed by SFC last week.

According to Walsin Technology vice president Chang Jiah-ning, his company would use the raised money for overseas material procurement. Chang claimed that his company is pricing the scheduled ECBs, which have won intensive attentions from interested investors.

Yageo announced a plan to issue US$150 million worth of ECBs in middle last month with a project period of five years. SFC permitted the fund raising project soon and Yageo hs completed the project last Friday.

Yageo assistant manager Chen Po-tzang said that the raised money would be used for the expansion project at the company's second plant in Suzhou, Jiangsu Province, mainland China. Yageo plans to pour about NT$7 billion to NT$8 billion (US$205.28 million to US$234.6 million) into the plant expansion project in the coming few years.

Yageo issued the ECBs smoothly by attracting many foreign investors, though provided some relative-disadvantageous terms such as zero nominal interest rate, and a –0.5% redemption rate, compared with the failure ECB issuance last year. Yageo tried to issue US$200 million worth of ECBs in last October but failed to complete the fund raising project within the limited period and finally applied to SFC for cancellation of the project in July this year.

Luxon, a major maker of aluminum electrolytic capacitors, recently also completed a ECB issuance project by raising US$5 million worth ECBs. The company said that it joined a joint ECB issuance project conducted by several banks and sold its ECBs at convertible premium of NT$10.53 (US$0.31) for each share.

Luxon said that the raised money was used mainly to repay the company's debts in relative-high interest rates and procure new production equipment thus to further strengthen the company's financial structures, cut interest expenses and elevate capital efficiency.