Taiwan's UMC launches $1.8 billion convertible bond sale, term sheet shows

By Yantoultra Ngui

HONG KONG, Oct 5 (Reuters) - Taiwan chipmaker United Microelectronics Corp 2303.TW, or UMC, plans to raise $1.8 billion through two zero-coupon convertible bond sales, with proceeds earmarked for equipment purchases and plant construction, according to a term sheet on Monday.

Here are details from the term sheet:

• UMC will offer $900 million of bonds due in April 2028 and $900 million due in October 2031. The bonds pay no interest but can be converted into UMC shares

• The 2028 bonds would convert at T$179.19 to T$186.81 per share, representing a premium of 17.5% to 22.5% over UMC's closing share price of T$152.50

• The 2031 bonds would convert at T$202.06 ($6.36) to T$209.69 per share, representing a 32.5% to 37.5% premium

• The dollar-denominated bonds will be linked to the Taiwan dollar but settled in US dollars

• The 2028 bonds carry an implied negative annual yield of 1.25% to 1.75%, while the 2031 bonds carry a negative annual yield of 0.25% to 0.75%

• Investors will have the option to require UMC to repurchase the 2031 bonds in 2027 or 2029

• Proceeds will be used for machinery and equipment purchases and plant construction

• The bonds are expected to price on Monday and settle later in the week

• Morgan Stanley MS.N and Citigroup C.N are joint global coordinators and bookrunners, while HSBC HSBA.L is also a bookrunner

• UMC did not immediately respond to a Reuters request for comment

($1 = 31.7750 Taiwan dollars)