By BLOOMBERG
Stats ChipPac Ltd, Southeast Asia’s biggest semiconductor assembler, is seeking to refinance US$400 million (RM1.76 billion) of debt in the first test of its credit strength without the implicit “AAA” backing of the government of Singapore.
The chip packaging and testing company plans to sell US dollar-denominated bonds due in five years to help repay part of an US$890 million bridge loan, chief financial officer Woo Kwek Kiong said in an email interview.
The company is currently seeking a US$500 million syndicated loan to pare the bridge loan from DBS.
The planned note offering comes after Temasek Holdings Pte Ltd, the Singapore sovereign wealth fund, cashed out from Stats ChipPac in October by accepting a takeover bid from Chinese firm Jiangsu Changjiang Electronics Technology Co.
Temasek’s departure triggered two rating downgrades by Standard & Poor’s just as the financing costs of lower-rated borrowers in Asia are rising amidst renewed global market jitters.
“The interest rate of any bond issued by the company will be in line with outstanding bonds issued by comparable companies in a similar industry and ratings category,” Woo said. “The transaction will be leverage neutral as proceeds will be used to refinance the bridge loan.”
China plans
Stats ChipPac expects “significant” prospects in China, one of its key geographic focuses that has historically demonstrated the fastest growth rate in the semiconductor assembly and testing business, Woo said.
Stats ChipPac is banking on strong support from strategic shareholders like JCET and Semiconductor Manufacturing International Corp, who are declared “national champions” of the industry in China, Woo said. That has opened the door to the previously inaccessible market segment in China, he said.
The company’s steps come amidst the slowest economic growth since 1990 in China and as the industry experiences a sluggish order book in North America.
At “BB-“, or three steps below investment grade, Stats ChipPac may have to pay 4.5% to 5% to sell the notes, according to Charles Macgregor, head of Asian high yield research in Singapore at Lucror Analytics. The company’s existing 4.5% notes due 2018 traded at 98.84 cents on the US dollar to yield 5.03%, according to Bloomberg-compiled prices.
“The proposed bonds would be structurally senior,” Macgregor said. “That said, markets may be more risk averse in light of the Paris terror attacks and the yield may be outside that range.”
— By David Yong
You must be logged in to post a comment.