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Foxconn Cancels Convertible Bond Sale Amid European Crisis

Foxconn Technology Co. (2354), a maker of metal casings for Apple Inc. (AAPL), canceled a plan to sell as much as NT$8 billion ($271 million) in convertible bonds, citing the effect of Europe’s debt crisis on credit markets.

The application to the financial regulator to sell the securities was withdrawn, the Taipei-based company said in an exchange filing today. The company’s operations and outlook remain strong, it said. Spokesmen C.K. Liu and Jack Huang didn’t answer calls to their office today.

Foxconn, which supplies the metal cases for Apple’s iPad and MacBooks, is looking to expand capacity and increase output for new products including ultrabooks, high-end notebook computers with thin metal shells, from Hewlett-Packard Co. (HPQ) and Acer Inc. (2353) The unit of Foxconn Technology Group, the world’s largest custom electronics maker, still needs cash, said Angela Hsiang, who rates the stock “outperform” at KGI Securities Co. in Taipei.

“They’ve been riding on Apple’s growth trend to move into ultrabook cases, and they need this cash to expand their capacity,” Hsiang said. The company also assembles game consoles for Nintendo Co., she said.

Foxconn Technology has NT$2.2 billion of bond payments due this year, according to data compiled by Bloomberg. The company had NT$24.5 billion in cash and equivalents at the end of September, with NT$18 billion in short-term borrowings and other short-term liabilities, excluding accounts payable, according to data compiled by Bloomberg.

Metal Casings

The company rose 2.7 percent to NT$134.50 at the close in Taipei trading, reversing a decline of as much as 3.4 percent. The benchmark Taiex index added 0.6 percent.

Foxconn, 10 percent directly owned by iPhone and iPad maker Hon Hai Precision Industry Co., supplies around 95 percent of its metal casings output to Apple, said Allen Chang, who rates the stock “neutral” at Barclays Capital Inc.

A cancellation of a convertible bond sale may result in the company switching to a straight bond offering, a move which could be positive for the shares because a convertibles issuance may dilute the stock, Chang said.

Nine of 16 analysts surveyed by Bloomberg recommend investors “buy” the stock while two say “sell” and five have a “hold” recommendation.

European Union financial markets have been pummeled by concern that Greece may default on its sovereign debt and pull out of the euro pact.

Countries including Greece, Portugal, Spain and Ireland have all been straining to meet sovereign debt payments because of budget deficits that widened after the last recession crimped tax receipts. Portugal, Ireland and Greece received EU bailouts in exchange for pledges to slash spending.

To contact the reporter on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net.

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net.

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