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THSRC Signs NT$380 B. Refinancing Contract

Jan 11, 2010 | By CENS

Taipei, Jan. 11, 2010 (CENS)--Taiwan High-Speed Rail Corp. (THSRC) signed a NT$382 billion refinancing contract with a consortium of eight government-dominated banks and the Ministry of Transportation and Communications (MOTC) last Friday (Jan. 8), which promises to help it avoid the danger of insolvency, thanks to lower interest rates and longer maturity terms than existing loans.

The new loan, the largest in Taiwan's banking industry ever, carries an average interest of only 1.83% per annum, with terms ranging seven to 22 years, which will be available to THSRC in April, mainly for use by the company to pay off its existing loans, extended by a consortium of 22 domestic and foreign banks. The loan will enable the company to save NT$2.2 billion in interest payment annually, according to THSRC. An MOTC official estimates that backed by the huge loan, THSRC will not suffer any fund shortage by 2033.

The government will guarantee some NT$300 billion of the loan, to be provided by the banking consortium headed by Bank of Taiwan, with the other participants including Land Bank of Taiwan, Taiwan Cooperative Bank, Taiwan Business Bank, First Bank, Hua Nan Bank, Chang Hwa Bank, and Mega Bank.

This is the second major move by the government to bolster the financial stricken company, whose accumulated loss has hit NT$70 billion, following the takeover of its management last November.

Mao Chi-kuo, MOTC minister, reported that following the turnaround of its operation, the government will list THSRC shares, so that all local people can share the fruit of its management. However, an MOTC official admitted that the company will still face major difficulty in operation in the next six to eight years.

In addition to lower interest rate on average, interest rates for the new loan will be lower in the initial period than the latter period, an arrangement which can greatly alleviate the financial burden of THSRC in the next several years.

The loan can be roughly divided into two parts, the first part, NT$308.3 billion in scale, will be guaranteed by the government, used mainly to pay back the original government-guaranteed loans.

The second part, NT$73.7 billion in scale, will be mortgaged by the THSRC's assets and will be used, in addition to repaying some original loans, as working capital and in financing the construction of the three stations of Miaoli, Changhua, and Yunlin, as originally planned.


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