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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: derek cao who wrote (15398)	2/4/1998 3:08:00 AM
From: John Stichnoth	Respond to of 70976

Derek, I don't have a source, specifically. Just experience as a banker in Asia with other equipment suppliers. (My experience with Korea is dated, from 10+ years ago). Perhaps the term "uniformly" was too strong, but I don't think it's far off the mark. In selling to a Korean chaebol member, AMAT would be looking at an under-capitalized entity with strong corporate connections. Without the LC, AMAT would be faced with both Korean country risk (which is the risk that has come up to bite us all in this case) as well as the credit risk of the fab subsidiary. Because of its chaebol status, the fab would have no trouble getting an LC issued by its fellow-chaebol member bank. The weak link (or strong, depending how you look at it) in the chain is the arm's length stance of the US banks to their Korean counterparts. The fab's credit line from its bank has disappeared because the Korean bank can't get its letters of credit confirmed overseas. If AMAT, or other suppliers, had not been operating under LC's, they would have had payments missed by this time. The numbers would have been large, and we would have seen something in their statements by this time--unless I missed it. Have you seen anything about receivables writeoffs to Asia recently? Writeoffs, or the prospect of writeoffs would be material and would have to be disclosed. The thrust of my comment is directed to the closing down of credit availability, to explain why SEMI might need to step in on an interim basis. If/when the banks can get credit lines reestablished, which should occur within 6 months certainly, industry help will not be needed. The argument for SEMI stepping in is the threat of further structural damage to the Korean economy, as their whole economy shuts down for lack of international credit. I will repeat an anecdote I mentioned a couple of weeks ago. A banker acquaintance wanted to extend a credit line to a Korean company here in the US, which primarily imported from Korea. US bank management rejected the credit out of hand, because they are full of Korean country exposure. In essence they were preventing that Korean company the key asset it needs to help Korea climb out of the mess it's in: US dollar credit. just my .02--js