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Ratings of UMC unaffected by planned capital reduction, says Fitch Ratings

Ratings of UMC unaffected by planned capital reduction, says Fitch Ratings

The 'BBB' Long-term Issuer Default rating and Stable Outlook for United Microelectronics Corporation is not affected by the company's announcement of a plan to return NT$57.4 billion (about US$1.74 billion) to shareholders by reducing its number of shares by 30 percent, Fitch Ratings said on Thursday.
Subject to approval by shareholders in June this year, UMC's paid-in capital will decline to NT$133.9 billion from NT$191.3 billion after the reduction.
The cash payment has negligible negative impact on UMC's liquidity, Fitch said.
Although the company is paying out around 60 percent of existing cash on hand, its remaining cash balance still largely exceeds its debt due within one year. Fitch also said the leverage of UMC will remain within the current rating level.
On a pro-forma basis, UMC's leverage in terms of net adjusted debt over operating EBITDAR at end June 2006 will rise to around 0.1x from negative 1.0x. Fitch noted this action reflects UMC's confidence in generating sufficient cash flow from operations to meet the company's future dividend payments and capital expenditure requirement, including a new 12-inch wafer fabrication plant in southern Taiwan.
UMC possesses strong cash-generation capability with cutting-edge technology and a diversified client base. It has maintained operating EBITDAR margins above 46 percent since 2002, leading to positive free cash flow in 2005 and the nine months ended September 2006.
Established in 1980, UMC is the second largest dedicated integrated circuit foundry company with a global market share of around 19 percent in 2006.


Updated : 2021-05-09 03:54 GMT+08:00