Macronix prices GDR

First deal out of Taiwan after the electoral turmoil needs deep discount to fly.

Taiwanese chipmaker Macronix International braved the international capital markets yesterday morning becoming the first Taiwanese firm to raise equity after two weeks of political turmoil. The company raised $173.25 million through the sale of 13.125 million GDRs representing 525 million shares. The GDRs were priced at a discount of 9.92% to the closing price of the underlying shares on March 31.

Deutsche Bank was sole bookrunner on the deal and CSFB was co-lead manager. The deal is a Reg S transaction and the GDRs will be listed on the Luxembourg Stock Exchange, where they begin trading on April 5.

Bankers close to the transaction point to the factors working against the deal. "Given all the political turmoil and the excessive market volatility - the market was limit down two days in a row and then limit up two days in a row - a discount of this order was to be expected," said one banker close to the deal.

Nevertheless, the book was said to comprise some 45 investors of whom 50% came from non-Taiwan Asia, 35% came from the UK and 15% came from the rest of the world. The deal represents a 13.37% dilution for existing shareholders.

The deal had been expected to go within the first quarter and had already been delayed by a month for reasons internal to Macronix. The elections caused a further delay but by pricing just within March 31, this counts as a Q1 deal. Proceeds from the transaction will go to pay back debt and be used for the capex of building the company's Fab 3.

There was some confusion in the market because on the same day as this GDR issue was launched, Macronix filed with the Taiwan Stock Exchange an application to sell a further 1.3 billion shares through a DR offering. This future trade would raise as much as NT$16 billion, according to the company's filing, and the coincidence caused some confusion in the market as to which deal was actually which.

The deal was said to be oversubscribed and indeed in yesterday's trading the GDRs were bid up to $13.6, a 3% gain on the sale price, a respectable performance given the circumstances. Indeed it was important that this deal go well to provide some stability to the international markets coming to terms with the events in Taiwan over the past few weeks.

"We believe we were in uncharted territory with this," says the banker. "The political turmoil and unprecedented volatility in both the market and the stock made us price this at such a discount. But we had to make sure this transaction did not fail and add even more problems to the market."

When compared with the PROMos GDR that was sold on March 9, before the election, that deal had to price at a 9.7% discount, making the 9.92% discount on the Macronix trade look very reasonable.

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