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Semiconductor material maker Isola prepares debt restructuring: sources
July 12, 2017 / 11:27 PM / 5 months ago

Semiconductor material maker Isola prepares debt restructuring: sources

(Reuters) - Isola USA Corp, a supplier to the semiconductor and electronics industry, has tapped an investment bank to restructure its approximately $525 million debt load, as competition from Asia saps its profits, according to people familiar with the matter.

Isola has hired investment bank Evercore Partners Inc (EVR.N) to help restructure its debt, which will start coming due in 2018, said the sources, who asked not be identified because Isola’s debt restructuring plans are confidential.

Evercore declined to comment. Buyout firms TPG Capital LP and Oaktree Capital Group LLC (OAK.N), which own Isola, also declined to comment.

Chandler, Arizona-based Isola did not immediately respond to a request for comment.

The move underscores the extent to which the global electronics supply chain Isola sells to has changed since it was separated in 2004 from German coal mining conglomerate RAG Aktiengesellschaft. Since then, major consumers of chips such as Samsung Electronics Co Ltd (005930.KS) and Apple Inc (AAPL.O) have sought to reduce their supplier relationships and cut costs.

Isola’s earnings have faced sharp declines after stiff competition from bigger and more deep-pocketed players such as Japanese conglomerate Panasonic Corp (6752.T). Rivals such as China’s Shenghyi Technology Co Ltd (600183.SS) have also made it harder to compete on price in a fragmented, low-margin market.

Isola’s laminates, which are used in coatings on circuit boards, are sold into the electronics industry, including in high-end consumer electronics and communications equipment. The company has seen its annual profit fall from $100 million three years ago to a projection of about $45 million for 2017, according to the sources.

    Isola had plans in 2011 to raise up to $100 million in an initial public offering (IPO), and then use the proceeds to pay down debt. But in 2014, it withdrew its IPO plans.

    Isola’s $250 million term loan due in 2018 was trading at a significant discount to face value this week, indicating investor concerns about repayment. The loan was trading at 64 cents on the dollar, according to Thomson Reuters data.

    Isola was founded in Germany in 1912 making copper-clad laminates, according to its website, and later became the largest supplier of laminate materials to printed circuit boards in the United States and Europe. It has 1,800 employees across eight manufacturing facilities worldwide.

    (This version of the story corrects to show that TPG and Oaktree own Isola, not that they own Evercore, in third paragraph)

    Reporting by Jessica DiNapoli and Liana B. Baker in New York, editing by G Crosse

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