S’pore chip firm faces funding test after split from Temasek

SINGAPORE — Stats ChipPac, Southeast Asia’s biggest semi-conductor assembler, is seeking to refinance US$400 million (S$570 million) of debt in the first test of its credit strength without the implicit AAA backing of the Singapore Government.

It plans to sell US dollar-denominated debt that is due in five years to help repay part of an US$890 million bridge loan, Stats ChipPac Chief Financial Officer Woo Kwek Kiong said yesterday.

The company is currently seeking a US$500 million syndicated loan to pare the bridge loan from DBS Group Holdings.

The planned note offering comes after Temasek Holdings, the investment company wholly owned by Singapore’s Minister of Finance, cashed out from Stats ChipPac as Chinese firm Jiangsu Changjiang Electronics Technology completed its takeover last month.

Temasek’s departure triggered two rating downgrades by Standard & Poor’s just as the financing costs of lower-rated borrowers in Asia were rising amid 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,” Mr Woo said.

“The transaction will be leverage neutral as proceeds will be used to re-finance the bridge loan.”

Stats ChipPac expects “significant” prospects in China, one of its key geographical areas of interest, which has historically demonstrated the fastest growth rate in the semi-conductor assembly and testing business, Mr Woo said.

The company is banking on strong support from strategic shareholders such as JCET and Semiconductor Manufacturing International Corp, who are declared “national champions” of the industry in China, Mr Woo said.

That has opened the door to the previously inaccessible market segment in China, he added.

The company’s steps come amid the slowest economic growth since 1990 in China and as the industry experiences a sluggish order book in North America.

At BB-, or three notches below investment grade, Stats ChipPac may have to pay 4.5 per cent to 5 per cent to sell the notes, according to Mr Charles Macgregor, head of Asian high-yield research in Singapore at Lucror Analytics.

The company’s existing 4.5 per cent notes due in 2018 traded at S$0.9887 on the dollar to yield 5.02 per cent, according to Bloomberg-compiled prices.

Stats ChipPac has named Barclays, DBS and ING as joint book-runners and lead managers to arrange a series of investor meetings in Asia, Europe and the US this month, a person familiar with the matter said earlier. BLOOMBERG

CORRECTION: We had earlier misreported Mr Woo Kwek Kiong's designation as CEO of Stats ChipPac. That is incorrect. Mr Woo is the Chief Financial Officer. We are sorry for the error.