Distressed Chip Maker Qimonda Receives $452 Million Bailout

Munich, Germany (AHN) - Distressed memory-chip maker Qimonda AG (NYSE: QI) said Sunday it has received a 325 million euros ($452 million) financing package from its parent company Infineon Technologies AG, the German Free State of Saxony, and an unidentified Portuguese bank.

The companies in the semiconductor industry have been struggling with the sharp slump in the demad of memory-chips from the retail and corporate businesses across the globe amid the extremely difficult market situation.

The package includes a 150 million euros ($208.8 million) loan from Saxony, a 100 million euros ($139.24 million) loan from a leading financial institution in Portugal and a 75 million euros ($104.42 million) loan from Qimonda's parent company.

Infineon (NYSE: IFX) currently holds a 77.5 percent equity interest in Qimonda.

"The financing arrangements are based on the significant potentials offered by our highly innovative Buried Wordline Technology," Kin Wah Loh, CEO and president of Qimonda AG, said in a statement on Sunday.

"They allow Qimonda to complete its repositioning, ramp up this exciting technology and re-establish its competitive position in the memory industry."

The credit is expected to provide Qimonda a chance to maintain operations at its plant in Dresden, which has as many as 3,200 employees.

"This is good news for the employees of our subsidiary Qimonda before the christmas season," Peter Bauer, CEO of Infineon Technologies AG, said in a seperate statement on Sunday.

In addition, Qimonda will have the opportunity to draw on a 280 million euros ($389.85 million) state guarantee by the Federal Republic of Germany and the Free State of Saxony, which depends on approval from national and European regulators.

Based on such guarantees, the company said that it is in advanced negotiations concerning the financing of 150 million euros ($208.8 million) of this amount, the Munich, Germany-based memory-chip maker said.

In return of the latest loans, Qimonda has committed the further development of its research and development and manufacturing sites in Porto, Portugal and Dresden, Germany.

The company is increasing research and development efforts in Porto and intends to quickly ramp up its new 46nm Buried Wordline Technology and improve economies of scale in manufacturing at its lead facility in Dresden, Qimonda said.