Rights issue at 66% discount; Temasek to buy its share and act as standby purchaser
By OH BOON PING
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(SINGAPORE) Chartered Semiconductor Manufacturing is raising about US$300 million through a 27-for-10 rights offering to existing shareholders.
The chipmaker said the rights shares will be priced at seven cents each, which approximately translates to a 65.9 per cent discount to Chartered's last traded price of 20.5 cents per share yesterday.
'Pursuant to the rights offering, Chartered expects to issue approximately 6,870 million new ordinary shares,' the company said in a statement.
Shares in Singapore-based Chartered tumbled more than 20 per cent yesterday, and the company requested a trading halt.
Chartered's major shareholder, Singapore Technologies Semiconductors, a wholly-owned subsidiary of Temasek Holdings, has undertaken to subscribe to its pro-rata entitlement of about 59.4 per cent of the offering and 'committed to the underwriters to act as standby purchaser and purchase up to 90 per cent of the offering (which includes its undertaking to Chartered and the underwriters for its pro-rata entitlement)'.
The directors of Chartered who are eligible to take part in this offering also intend to take up their entitlements, either in part or in full.
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On the rationale behind the move, Chartered said the crisis in the financial markets and deteriorating economic conditions globally have adversely impacted the semiconductor and foundry industries. The depth and duration of the downturn are uncertain and it is not clear if credit will be available on reasonable terms.
The rights offering, it says, will strengthen its capital position, and provide Chartered with additional liquidity to manage its maturing debts and future capital expenditures.
The rights offering will also improve Chartered's debt to equity leverage ratios and further support the company in executing its technology roadmap.
As of Dec 31, 2008, Chartered's cash balance was US$594.1 million, and the company had unutilised credit facilities of about US$1 billion of which US$750 million are credit facilities available for equipment purchase.
On the same date, Chartered had obligations totalling US$2.1 billion.
After the rights offering, the company plans to consolidate the number of its shares in issue, on the basis that every 10 existing shares will be consolidated into one share.
The share consolidation will become effective only if, and after, it is approved by shareholders at an extraordinary general meeting expected to take place on April 30.
Chartered said the share consolidation will help reduce certain fixed costs and also reduce percentage fluctuations or volatility in the trading of its shares.
Early this year, Chartered said it expected further losses and was cutting 600 jobs after posting a quarterly loss as customers cut orders amid the global economic slowdown.
Some 90 per cent - or around 540 jobs axed - will be from Singapore.
Separately, Chartered issued a fresh guidance yesterday for its first-quarter 2009 results. Turnover is forecast at US$238 million, while net loss is projected at US$127 million.
The chipmaker earlier reported US$114 million in fourth-quarter net loss, while full-year 2008 loss came to US$92.6 million, amid falling global demand for semiconductor chips.
Chartered plans to release its first-quarter 2009 results on April 24 before the Singapore market opens.
Earlier this month, Moody's Investors Service downgraded Chartered's unsecured bond ratings to Ba2 from Ba1 and said the rating continues to be on review for a further downgrade. Chartered ranks alongside China's Semiconductor Manufacturing International Corp in the market for custom-built microchips, which is dominated by larger rivals Taiwan Semiconductor Manufacturing Co and United Microelectronics Corp.
Its shares had been rising this year on speculation of a merger with a larger Taiwanese chipmaker, but some market observers discounted such a possibility. Chartered shares tumbled about 80 per cent last year.
Besides Chartered, other Temasek-linked companies that recently raised capital through rights issues include Standard Chartered, DBS and CapitaLand.
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