Taiwan firms launch fund raisers
Taiwanese companies have been active in debt markets in the past few days with Cathay United Bank and United Microelectronics Corp both pricing new issues in the early hours of yesterday morning.
Cathay United, a unit of Cathay Financial Holdings and Taiwan's ninth-largest commercial bank in terms of assets, raised US$500 million through a lower tier-two bond while made-to-order semiconductor supplier UMC sold US$381.4 million worth of three-year, zero-coupon convertible bonds.
Cathay United's issue was the first lower tier-two bond from a Taiwanese bank in the international market, according to sources.
The UMC bonds, which were sold through joint bookrunners Morgan Stanley and Lehman Brothers International, will be convertible into American Depositary Shares at a 17 per cent premium to the US$3.26 closing price in New York on Tuesday. Each bond can be converted into 2,621.9192 ADSs.
The bonds were issued at par and will be redeemed at the same level, which means they offer no yield should investors choose not to convert them. According to a pricing sheet, the funds raised will be used to buy raw materials.
UMC's share price rose 1.27 per cent to NT$19.95 ($4.66) in Taiwan trading yesterday.
Cathay United, through sole bookrunner JP Morgan, offered investors a 15-year bond with a call-option that is exercisable after 10 years, meaning the bank can choose to buy them back at face value after the first 10 years.
The subordinated bonds were priced at 125 basis points over the 10-year US treasury with a coupon of 5.5 per cent and a yield to call of 5.503 per cent.
Unless they are called, the bonds will convert to a floating rate instrument after 10 years, paying interest of 180 basis points over the six-month US dollar London Interbank Offered Rate, according to a pricing sheet.
Market sources said the issue attracted US$600 million worth of demand.
Standard & Poor's, which rated the inaugural lower tier-two bond single A, said the bank was expected to use the proceeds to fund its foreign currency-denominated operations.