Zeev's Turnips Patch-No Politics (ZEEV)

[Smart_Money]

ML left with holding the bag. Yup business is this bad.


Merrill left holding unsold chip issue
By John Burton in Singapore
Published: October 6 2002 22:03 / Last Updated: October 6 2002 22:03


Merrill Lynch looks set to become an unwilling shareholder in Singapore's Chartered Semiconductor on Monday after a US$633m rights issue it underwrote for the troubled state-owned chipmaker fell flat.

As the lead underwriter, Merrill might end up with up to 18 per cent of Chartered at a cost of $250m as it mops up unwanted shares. The US investment bank on Sunday would not comment on its exposure.

Merrill received an estimated $2.5m fee for underwriting the deal, which involved Chartered issuing eight new shares for every 10 held by existing shareholders. The offer closes on Monday.

Singapore Technologies, the state investment group and Chartered's parent, said it would take up its entire 60.5 per cent entitlement.

Chartered surprised the market in early September when it announced the rights issue in spite of an earlier assurance that it was not in need of new funds.

The new shares were priced at S$1, a 52 per cent discount to its share price then. But the shares are now trading slightly below S$1 on worries of continued losses and increased capital investments at the world's third-largest maker of customised chips.

Analysts believe that the share price must rise to at least S$1.05 to entice shareholders to take up the offer.

Unless Merrill finds a strategic investor to buy its stake, it might face a long wait in selling the shares on the open market since the stock overhang is likely to depress the share price.

Chartered has fallen by 75 per cent this year, making it the worst performer in the benchmark Straits Times Index, after the chipmaker reported losses over the past six quarters. It is not expected to return to profitability until at least 2004.



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