ChipMOS renogiates with GE Money

HSINCHU, TAIWAN: ChipMOS Technologies (Bermuda) Ltd announced that ChipMOS Technologies Inc., a wholly-owned subsidiary of ChipMOS, has completed the renegotiation of the terms of its equipment leases with GE Money Taiwan Ltd, which also involves ING Bank N.V., Taipei Branch and ABN AMRO Bank N.V., Taipei Branch, and EQUVO Pte Ltd, Taiwan Branch.

ChipMOS Taiwan and GE entered into a Master Lease Agreement on December 22, 2006, pursuant to which GE has leased equipment to ChipMOS Taiwan under a series of lease agreements to satisfy the production capacity required for ChipMOS Taiwan's business with Spansion LLC. GE also entered into certain financing agreements with ING and ABN for funding the leases.

Due to the global financial crisis and economic downturn, ChipMOS Taiwan initiated the renegotiation with GE, ING and ABN in order to relax its cash outflow and, after comprehensive discussions, the lease renegotiation has been concluded.

As a result of the renegotiation, ChipMOS Taiwan has agreed to continue certain leases with GE and the other leases with GE have been assigned to EQUVO, the new lessor, which has also assumed all corresponding financing obligations of GE to ING and ABN. In addition, EQUVO has also agreed to extend the rental payment schedules for the leases assigned to EQUVO.

The original leases provided the Company with options to purchase the leased equipment at the expiration of the leases in the period from Q4, 2009 to Q4, 2010, and the Company believes that its operational planning may require purchasing most of the leased equipment at that time.

The renegotiated leases have extended the lease terms from three to five years, and the rental payments under the renegotiated leases have also been adjusted to cover the residual value of the leased equipment.

Under current accounting rules, the operating lease accounting treatment will no longer apply and the renegotiated equipment leases will be treated as capital leases. As a result, a $73.8 million capital expenditure is expected to be recognized in the balance sheet of Q4, 2009.

However, the US$73.8 million of capital expenditure will not be immediate cash out flow in Q4, 2009. The payment will be spread from Q4, 2009 to 2013. After the new leases come into effect, rental payments will decrease by around $2.8 million per month and depreciation will increase by around $1.6 million per month starting from December 2009 and extending until mid 2012.