AU Optronics finally awards mandate

Following a hotly contested bidding process nine banks emerge with the mandate to arrange an NT$25bn deal

A nine strong arranger group has been verbally mandated by AU Optronics to arrange a NT$25 billion ($722 million) fundraising. The winners comprises ABN Amro Bank NV (Taipei), Citibank (Taipei), International Commercial Bank of China, Chiao Tung Bank, Taipei Bank, Land Bank of Taiwan, First Commercial Bank, Bank of Taiwan and Hua Nan Commercial Bank.

Bankers in Taiwan have been waiting for a long time for this announcement as bids were placed well over a month ago. The group triumphed over a three bank team that included Chinatrust Commercial Bank, HSBC and United World Chinese Commercial Bank.

The last loan deal for the borrower was a dual currency facility worth some $570 million and was arranged by Bank of Taiwan, Chinatrust Commercial Bank and Taiwan Co-operative Bank. Banks joining the deal earned a margin of 80bp over the CP rate and a top tier fee of 7bp for commitments of NT$1 billion ($29 million) or above.

Proceeds from this loan financed the initial construction costs of its fifth generation thin film transistor liquid crystal display (TFT-LCD) monitor plant in Taiwan. This current deal will provide further funding to the same construction project.

Market observers have voiced concerns over the market appetite for such a large fundraising, especially given the fact that almost all the domestic banks already have many TFT-LCD assets on their books following a spate of deals that were syndicated last year. In addition to AU Optronics a number of other borrowers came to the market in search of funds to finance the construction of their fifth generation TFT-LCD plants.

These include Quanta Display Corp, Chungwha Picture Tubes and Chi Mei Optoelectronics Corp raising a total of almost $2 billion. Market rumours suggested that the losing bidders actually offered a lower price than the winners, but the borrower selected the higher priced deal as it was concerned about attracting lenders into the transaction.

One senior loan syndicator said that if the pricing was any lower than the borrower's previous financing then it would be hard to convince banks to sign up. Bankers close to the deal are quick to point out that, although most Taiwanese loans are for small amounts, there is enough liquidity to completed these large financings.

The largest deal completed in Taiwan so far this year has been the NT$19.8bn ($572 million) 20 year loan for Kaohsiung Rapid Transit Corp. Dealogic figures show that the syndication was successful with 19 banks joining the deal.

Arrangers Bank of Taiwan, China Development Industrial Bank, Industrial Bank of Taiwan, Taiwan Co-operative Bank and International Commercial Bank of were able to achieve a sell down of over 61%. Activity picked up in the Taiwanese dollar market in the first half of 2003 with NT$126bn ($3.65 billion) being completed compared to NT$94 billion ($2.7 billion) in the same period in 2002.

This has led bankers to believe that confidence is returning even given the outbreak of Sars and the tensions on the Korean peninsular. Despite this some bankers are wary that the facility will not receive an enthusiastic response from the market as the sentiment towards the TFT sector has weakened some what in the past year.

The arrangers do not share this pessimism and are confident that many banks will be willing to subscribe to the deal. The official mandate is due to be awarded today (Friday) and general syndication will follow at the beginning of August.

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