Back to list

Shares of ProMOS rebound on debt for stake swap reports

2011/07/26 12:55:23

Taipei, July 26 (CNA) Shares of ProMOS Technologies Inc. staged a rebound in Tuesday morning trading on reports that bank creditors had agreed to swap half of the company's heavy debt for equity to help rescue the financially troubled memory chip maker, dealers said.

They cautioned, however, that the gains were just technical in nature after a recent sell-off, because ProMOS and its counterparts in the dynamic random access memory (DRAM) sector remained haunted by falling product prices.

ProMOS, which has been listed on the over-the-counter market since 1999, rose 7 percent, the maximum daily gain, to NT$0.66 (US$0.02) with 1.48 million shares changing hands Tuesday morning, while the OTC index was up 1.12 percent at 131.88.

"The debt for stake swap reports prompted many investors to think the government does not want ProMOS to fail," Horizon Securities analyst Benson Huang said.

Many of the 30 banks with outstanding loans to ProMos are government-run or government-invested financial institutions, Huang said, referring to the largest creditors, such as Bank of Taiwan and Taiwan Cooperative Bank.

The company's stock had plunged amid fears of a closure since the company's debt problems surfaced in April, but that may be changing, Huang said.

"It seems that there is light at the end of the tunnel due to the debt for stake swap reports," he said.

According to the reports, the creditors have agreed to exchange NT$28 billion of ProMOS's total debt of NT$57 billion for equity in the company, and are willing to lower the interest rate to 0.1 percent from 3.5 percent.

The reports said the creditors have requested the borrower to come up with a proposal explaining how it will use the funds the company will save from the reduced interest payments for future operations.

The creditors have also asked ProMOS to install new management next year to restructure its operations, the reports said.

In addition, ProMOS plans to reduce its capital to NT$5 billion from the current NT$25.4 billion to facilitate financial restructuring. The capital reduction proposal is pending approval from a special general meeting.

"But, I remain cautious about the outlook of ProMOS amid weakening global demand for DRAMs," Huang said.

Huang said investors have to pay full attention to how ProMOS will restructure itself after the resolution of the debt problems.

He suggested it would be feasible for the company to allocate part of its capacity to specialty memory chip production to meet the growing demand for mobile communications devices.

(By Frances Huang)