Chartered Semiconductor steers obstacle course to investors

The launch yesterday (Monday) of a $350 million five-year convertible for Chartered Semiconductor caught a large section of the Asian equity capital market off guard and divided an even greater number of participants, including those who fought fiercely, and in some cases bitterly, for the deal in the first place.

All convertibles come down to credit, but the problem with Chartered seems to be that there is no spread consensus at all, with industry experts arguing for ranges veering from 175bp over Libor to over a 300bp level. Comparables are few and far between and at the heart of the issue lies the fact that while the company is located and ultimately majority-owned by AAA/AA1-rated Singapore, it is operating a capital-intensive business, in which inventory build-up and slowing global demand has seen the sector's stock prices decimated by global equity investors.