Chartered Semiconductor Manufacturing is set to draw down on a $653 million medium term trade finance loan from US Exim Bank following the signing of the deal last month.
The credit facility, which is divided into two tranches for drawdown and has an availability period of between two to four years, is a more cost effective alternative source of financing for the BBB-minus-rated company, which has historically tapped the bond markets for funding.
Exim Bank agreed to extend the loan to support the export of US capital equipment that will be used in the building of the first phase of Fab 7, a 300mm wafer fabrication facility. Chartered is purchasing equipment from Santa Clara-based Applied Materials Inc., among other US suppliers.
JPMorgan is the guaranteed lender on the transaction, and acted as advisor to Chartered during the 10-month negotiation process. "We helped Chartered build a case to take to Exim Bank," says Bruce Alter, who heads JPMorgan's trade finance business in Asia. "The case focused on the fact that the company buys most of its capital equipment from the US."
While the loan will help US machinery producers, Exim Bank conducted a fairly extensive economic impact review before signing the deal. Because the US produces its own wafers there were questions about whether extending finance to Chartered would have a negative economic impact at home.
The review confirmed that Chartered's output from the new fabrication facility would exceed 1% of overall US production and this raised some concerns.
Astar Saleh, head of Asia structure trade at JPMorgan, says the loan will be drawn down in accordance with the construction schedule of the fab. "Each tranche of the loan will be repaid over a period of five years."