DRAM maker ProMOS Technologies' creditor banks originally planned to convert the company's debts into equity, but the plan has stalled for the time being because ProMOS's financial restructuring consultant, KPMG, has proposed a debt discount ratio that is considered too high and is unfavorable to creditor banks.
Due to the high discount ratio, the creditor banks will not review the debt-for-equity swap proposal until the emergence of strong strategic investors, remarked Susan Chang, chairperson of Bank of Taiwan, one of the leading creditor banks.
KPMG proposed that about NT$28 billion or 50% of ProMOS's total NT$57 billion (US$1.97 billion) outstanding debts to banks be converted into equity.
ProMOS is also planning to slash its capital by 85%, or about NT$21.62 billion, to only NT$3.82 billion, and then to solicit new investment of NT$15 billion from strategic investors. Prior to the debt-for-equity swap, ProMOS's total capital after restructuring would reach only NT$18.82 billion.
The amount of NT$28 billion in debts has to be discounted before converting into equity, otherwise ProMOS total capital would be approaching to NT$50 billion after the swap, which would be unhealthy for ProMOS, KPMG explained.
The potential strategic investors as a whole should be the largest shareholder of ProMOS after restructuring, accounting for 50-70%, while the creditor banks would take up a 15-30% share, according to KPMG's proposal.