Banks approve NT$83 bil. Formosa Plastics loan

By Ted Chen, The China Post

TAIPEI, Taiwan — Several banks yesterday signed an agreement to provide a NT$83-billion syndicated loan to the Formosa Plastics Group (FPG, 台塑集團), representing the largest borrowing program by the conglomerate in the past nine years since the group’s completion of its Sixth Naphtha Cracking Project (六輕) over a decade ago.

According to reports, the conglomerate, comprised of Formosa Plastics Co. (台塑), Nan Ya Plastics Co. (南亞), Formosa Chemicals & Fibre Co. (台化), and the Formosa Petrochemical Co. (台塑化) intends to allocate the borrowed funds towards development of its overseas operations, expansion of its plants and equipment, capital expenditure, and repayment of standing bank loans. Management of the syndicated loan will be led by Mega International Commercial Bank (兆豐銀), Bank of Taiwan (台灣銀行), Taiwan Cooperative Bank (合作金庫), Hua Nan Bank (華南銀行), and Land Bank (土地銀行), in addition to 20 other banks. China Construction Bank Joins Syndicated Loan to FPG Most notably, China Construction Bank was listed among lenders participating in the syndicated loan, marking its first big deal since establishing a Taipei branch in June this year. On the merits of FPG’s excellent credit rating, stellar track record in profitability, sound financial management and strategic operational vision, participation in the syndicated loan was received with exuberance by financial institutions, Mega International Commercial Bank said. According to reports, banks consenting to the deal had prepared over NT$120 billion for FPG’s disposal, surpassing the conglomerate’s original request of NT$70 billion by 71 percent. FPG provided ample collateral in the form of land parcels situated near its sprawling Sixth Naphtha Cracking complex. In addition, the conglomerate plans to repay the loan within 7 years, partly funded by forthcoming plans for large-scale corporate bond and share issuances overseas. The FPG has issued NT$65.6-billion worth of corporate bonds, of which over 52 percent have been slated for purchase by specific institutions, according to Mega International Commercial Bank, which reiterated that the conglomerate does not lack partners interested in collaborative endeavors.

Meanwhile, industry observers remarked that portions of the loan are likely to be allocated towards two steel mills built by the conglomerate in Vietnam, which are expected to commence operation in 2015 and 2016. Once online, the two plants will be among the first large-scale integrated steel mills to be founded in Southeast Asia.