Holders come out in force for Epistar CB put

Epistar emptied its coffer after all holders of its $250 million convertible debt decided to sell the bonds back to the company.

Taiwan’s Epistar could resort to equity or debt fundraising in the near future after it used up all its cash to buy back its $250 million overseas convertible bonds over the weekend.

The company, which manufactures light-emitting diode (LED) chips and wafers, was required to repurchase all the bonds as part of an agreement when it sold the bonds three years ago. According to the terms, bondholders were eligible to sell the five-year bonds back to the company at par from August 7 onwards.

In a company statement on Monday, Epistar said it had redeemed the bonds in full on the put date without specifying how it funded the redemption. According to bond traders, the 0.25% CB closed slightly below par at around 99.9 on Friday.

Bondholders had every reason to sell back to the company because stock conversion held little appeal given the weak performance of Epistar shares. The stock closed at NT$24.6 on Friday, representing a 62% discount to its NT$65.13 conversion price.

The company is believed to use up all its cash reserves for the buyback. According to its latest financial statement, it had NT$7.8 billion ($248 million) in cash as of the end of March this year.

Epistar is a repeat convertible bond issuer and has a history of rolling over its convertible debt. Proceeds from the Reg-S deal sold in 2013, which was redeemed over the weekend, were fully used to refinance another CB sold two years earlier.

However, bond specialists suggest the company is unlikely to issue another convertible bond given that its shares are trading near their all-time low.

Epistar announced in May it had laid off nearly 100 employees in its Hsinchu LED plant. The company explained the layoff was a result of falling LED prices due to increase supply from Chinese manufacturers.

The company reported a net loss of NT$1.7 billion in the first quarter this year, reversing a NT$865 million net profit in the same quarter last year.

¬ Haymarket Media Limited. All rights reserved.