Nepes has decided to sell its loss-ridden chip package arm. It has notified private equity funds that has provided loans to Nepes Laweh that it plans to restructure and sell the business, sources said.
Nepes plans to leave the bare minimum of researchers at Nepes Laweh then sell it, they said. Nepes Laweh’s panel-level package (PLP) factory has stopped operation and staff were being laid off, they added.
A source at one of the private equity funds that invested in Nepes Laweh said they believe they can’t recuperate the funds and is preparing to mark it as a gross loss.
Concerns over Nepes Laweh by investors began late last year and there have been rumors that Nepes was preparing to shut down the business.
Nepes chairman Lee Byung-koo told TheElec in a call denying that it was shutting down the business unit and claimed the business would continue.
Lee added that he has found agreement with investors on the future direction of the business unit. He declined to share specifics of this agreement.
Nepes Laweh was formed after splitting off from Nepes in February 2020. However, it seems the company has failed to overcome the difficulty of manufacturing PLP.
Since its founding, the business unit has always been in the red and accumulated 248.4 billion won in operating loss as of last year. Sources said the company failed to secure customers due to its low yield rate for PLP.
It was in talks with Qualcomm for a possible deal but this floundered due to a low yield rate. Nepes Laweh is earning revenue from the wafer-level-package work given by Nepes but this is considered insufficient to maintain the business.
Nepes is expected to face huge heavy criticism from investors for the decision to sell Nepes Laweh, Nepes loaned the unit 61.6 billion won. The unit also burrowed 60.1 billion won from the Industrial Bank of Korea and 15 billion won from NH Nonghyup; Nepes is also burdening this debt.
Nepes Ark also loaned Nepes Laweh 36 billion won; 20.3 billion won of it has already been marked as a gross loss. Nepes Ark investors may act on this ill-conceived loan.
The private equity funds that bought the convertible bonds and convertible preferred shares could also use their foot option so that Nepes has to burden Nepes Laweh’s obligations. Nepes Laweh received 170 billion won in funding from offering these bonds and shares. However, the foot option clause can only be used Nepes acted negligently, so it is unclear at this point whether the funds can use the option.
