Innolux Finding it Difficult to Turn a Blind Eye on Chi Mei’s Financial Situation

LED chip manufacturer Chi Mei Technology Corp went out of business last month after a surprise exodus by the company’s board members. A staggering amount of NT$5.6 billion in unpaid debts has lead to anger from creditor banks. The phones were ringing off the hook yesterday (7) for Chi Mei’s top shareholder Innolux with calls from legal persons and investors. Innolux expressed that during today’s (8) online conference, chairman Tuan Hsing-chien will be there himself to offer explanation.

In a public statement, Innolux explains that after the reinvestment in Chi Mei Lighting by Chi Mei Corp and the merger with Innolux, Chi Mei had sole control over the company’s management.

Innolux had a total investment of about NT$600 million in Chi Mei Lighting. Related losses have already been recognized and listed for the first part of this year. The total investment value of NT$180 million will be listed for the second half of the year. Legal persons estimate that Innolux will have an after tax profit margin of over NT$4 billion after the 2Q13, surpassing AU Optronics. Due to adverse effects from the debt crisis with Chi Mei Lighting however, Innolux’s conference being held today might go off track.

Innolux board members decided on a resolution yesterday to bid the reduced share capital at NT$2,900 thousand. The company explained that the reduction in share capital is due to the need to allocate stock options in the wake of some employees leaving the company.

The creditor banks for Chi Mei Lighting have gone through the Bankers Association to ask for the Ministry of Finance’s assistance in acting as an official between the banks and Chi Mei Lighting’s shareholders to settle the debt.

Creditor banks remarked that last December, Chi Mei asked for a bailout via the Ministry of Finances’ debts consultative and control mechanism. If a similar situation in which shareholders refuse to assume responsibility for debts were to arise again, creditor banks hope that the Ministry of Finance can step up to help negotiate a settlement so as to not delay the process.

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