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Taiwan DRAM maker Powerchip faces further tests

23.06.2009
Powerchip Semiconductor, formerly the largest DRAM maker in Taiwan, was able to secure agreements with enough holders of a convertible bond that came due at the end of last week to move forward on a new repayment plan, but the company faces further loan repayments soon.

The company on Monday said at least 90 percent of holders of US$158.05 million in bonds agreed to a new deal to pay them $600 in cash for every $1,000 bond, with the remainder paid in shares of company stock. The company also extended the deadline of the offer to this Thursday, June 25 to allow remaining bondholders time to consider the offer.

Despite the agreement, analysts say Powerchip is far from out of the woods. More debt repayments loom for the company, and its cash reserves are dwindling.

Cash payments on the US$158.05 million in convertible bonds will reduce the company's cash position by NT$2 billion (US$60.9 million), leaving it with only NT$500 million, wrote Bruce Lu, an analyst at CLSA Asia Pacific Markets, in a report.

But the company faces payments on another bond of NT$2 billion next month.

Powerchip will have to raise money to pay off that debt, and while it still has assets to sell, it will become less competitive without those assets, Lu says.