Major Apple Supplier Taiwan Semiconductor Raises Capital Again Amid Odds

Major Apple Supplier Taiwan Semiconductor Raises Capital Again Amid Odds
  • Taiwan Semiconductor Manufacturing Company Ltd TSM sold its second dollar bond since April, Bloomberg reports
  • The Apple Inc AAPL supplier marketed a two-part offering, with initial price guidance set at 150 bps above U.S. Treasuries for the five-year tranche and 200 bps for the 10-year portion.
  • The sale comes amid Apple's plans to slow hiring and spending growth and TSMC's warning over delayed capital expenditure, citing higher costs for the planned construction of overseas plants.
  • Also Read: TSMC Overtakes Samsung In Chip Race By Capitalizing On Latter's Strengths: FT
  • The offering also acted as a breather for the exhausted Asian credit market, following the Federal Reserve interest rate hikes pushing up the borrowing costs significantly. 
  • The initial price guidance on the upcoming bond, which follows the firm's $3.5 billion four-part note in April, translates into yields of 50 bps above those implied on TSMC's comparable existing dollar notes. In April, TSMC raised $3.5 billion in bonds for its new plant in the U.S. state of Arizona.
  • The capital-intensive and cyclical nature of the semiconductor industry curbed TSMC's Aa3 credit rating, Moody's Investors Service said. 
  • TSMC's $12 billion plant in Arizona could exceed the anticipated costs with other headwinds in the form of soaring prices for raw materials and shipping due to Ukraine and the global supply chain crisis.
  • The chip industry continues to enjoy fast growth, although it would be very volatile as it's incredibly cyclical, according to a credit strategist. "TSMC can better weather the industry cycle given its dominant position, and it continues to enlarge market share," he noted.
  • Price Action: TSM shares closed lower by 3.13% at $86.20 on the last check Tuesday.

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