A new DRAM player enters the market

Inotera Memories, a joint venture between Nan Ya Tech and Infineon, mandates seven to raise plant financing.

After weeks of bidding, Inotera Memories Inc has finally awarded a mandate for its $260m five-year fundraising. The victorious consortium comprises Citigroup, Taiwan Co-operative Bank, Chang Hwa Commercial Bank, Hua Nan Commercial Bank, Land Bank of Taiwan, Taiwan Business Bank and Standard Chartered.

Despite the small size, the mandate was hotly contested between two rival groups and the borrower deliberated for almost two months over the two pitches. The losing alliance consisted of Bank of Taiwan, Chiao Tung Bank, Chinatrust Commercial Bank and Taipei Bank.

The borrower is a joint venture between Nan Ya Technology of Taiwan and Infineon AG which is headquartered in Germany. A full guarantee for the loan will be provided by Nan Ya Plastics Corp, the parent of Nan Ya Technology.

Now that they have secured the deal, the arrangers are finalising the details of the loan and hope to launch the financing in the next two to three weeks. The margin being offered is just 45bp over Libor - a reflection of the aggressive strategy that had to be employed to win the mandate.

Market observers say they are not concerned with the low pricing as it carries Nan Ya Plastic risk and is considered a high quality credit by Taiwanese banks. Dealogic figures show that its last deal, a NT$69bn 10 year loan from 2000, attracted some 36 banks into the syndicate.

One banker claimed that excess domestic liquidity is also forcing pricing down to desperately low levels - mirroring the current situation since elsewhere in Asia such as in Hong Kong. Borrowers are taking advantage of this and are playing banks off each other to attain the lowest possible funding costs.

This does not seem to have affected the sentiment towards this credit as the arrangers report that they have already received calls from interested houses who want to join the facility. Indeed this situation is similar to various other deals emanating out of Taiwan, such as the recently completed NT$35bn financing for AU Optronics.

Despite the ultra competitive nature of the Thin Film Transistor Liquid Crystal Display (TFT-LCD) market, Taiwanese banks continue to join the financings in droves. One senior loan syndicator said that "this support will continue as there is national pride regarding Taiwan's position as a global leader in this field."

Indeed this was evident by the fact that 30 banks signed up to AUO's financing, with subscriptions totalling NT$10bn in excess of the originally requested amount. Again sources point to the quality of the credit - the leading Taiwanese manufacturer and third behind Korean giants LG Philips LCD and Samsung Electronics.

Funds raised by Inotera will be invested in the construction of a 12 inch Dynamic Random Access Memory (DRAM) chip plant. The deal is to be syndicated on a best efforts basis, so there will be no sub-underwriting phase and the arrangers are confident that the appetite exists to easily reach the required target.

Syndication will be launched in early November and the financing is scheduled to close by year end.

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