S.Korea's troubled Hynix given another chance

Zardon · Dec 30, 2002, 02:56 PM

SEOUL (REUTERS) - Creditors of South Korea's Hynix Semiconductor Inc. agreed on Monday to keep the troubled chipmaker from folding by swapping some debt into equity and rescheduling the remaining loans.

About 90 percent of the creditors attending a meeting to review proposals drawn up by advisor Deutsche Bank AG on restructuring Hynix approved the plan, said an official at state-run Korea Exchange Bank, the main creditor bank.

The bank declared the plans had been passed about one hour after the meeting began, he said.

The move will likely further exasperate U.S. computer-chip maker Micron Technology Inc., which has accused South Korean competitors of receiving government subsidies and has sought trade penalties against them.

Micron, the world's second largest memory chipmaker, failed in April to buy core assets of Hynix for $3.4 billion. It lodged a complaint with the U.S. Department of Commerce and the International Trade Commission in November and asked for tariffs to be imposed on Korean memory chip imports.

Creditors, who already own more than a 67 percent stake in Hynix through previous bailouts of the world's third-largest maker of computer memory chips, will exchange some 1.9 trillion won ($1.59 billion) in debt into equity and reschedule the remaining three trillion won of maturing debt.

These bailout plans would allow Hynix to free up some cash to catch up with its rivals in modernizing production facilities in an industry where production technology standards play a key role in deciding competitiveness.

South Korean creditors, who have led the restructuring of the country's indebted companies since the 1997-98 financial crisis, offer debt-to-equity swaps to cut debt while rebuilding the capital base for indebted but commercially viable companies.

However, creditors also approved a plan to combine every 21 shares in Hynix into one, another method widely used in South Korea before fresh capital is injected into a troubled company. This is aimed at preventing a company's share capital from being artificially expanded through a debt-to-equity swap.

The reverse share split followed by a debt-to-equity swap, expected to take place in April, will reduce Hynix's outstanding number of shares to 440 million from the current 5.2 billion. This will also cut the company's debt-to-equity ratio down to 71 percent from 147 percent now.

On the Seoul stock market, which dived over four percent on Monday on fears over geopolitical tensions, Hynix shares at one point rose by as much as five percent and then settled down to finish at 280 won -- down 1.75 percent on the day.
This complicated refinancing work, however, will be implemented in conjunction with additional self-rescue efforts from Hynix and the chipmaker will have to sell off assets designated as not being core parts of the company's business in terms of profitability and efficiency.

Hynix has recently agreed to sell its flat panel display business to China's BOE Technology Co. for $380 million, although more than half of the money will be paid by Hynix's creditors in the form of loans to the buyer.

On Monday, Hynix said it has agreed in principle with a domestic consortium to sell all of its 47.3 percent stake in a computer monitor making unit for 45 billion won.

In addition, Korea Exchange Bank said it has been talking with unspecified partners to sell Hynix's system integrated circuits business. It did not disclose more details.

Dec 30, 2002, 02:56 PM	#1
Zardon DriverHeaven Founder Join Date: May 2002 Posts: 32,480 Rep Power: 179	S.Korea's troubled Hynix given another chance SEOUL (REUTERS) - Creditors of South Korea's Hynix Semiconductor Inc. agreed on Monday to keep the troubled chipmaker from folding by swapping some debt into equity and rescheduling the remaining loans. About 90 percent of the creditors attending a meeting to review proposals drawn up by advisor Deutsche Bank AG on restructuring Hynix approved the plan, said an official at state-run Korea Exchange Bank, the main creditor bank. The bank declared the plans had been passed about one hour after the meeting began, he said. The move will likely further exasperate U.S. computer-chip maker Micron Technology Inc., which has accused South Korean competitors of receiving government subsidies and has sought trade penalties against them. Micron, the world's second largest memory chipmaker, failed in April to buy core assets of Hynix for $3.4 billion. It lodged a complaint with the U.S. Department of Commerce and the International Trade Commission in November and asked for tariffs to be imposed on Korean memory chip imports. Creditors, who already own more than a 67 percent stake in Hynix through previous bailouts of the world's third-largest maker of computer memory chips, will exchange some 1.9 trillion won ($1.59 billion) in debt into equity and reschedule the remaining three trillion won of maturing debt. These bailout plans would allow Hynix to free up some cash to catch up with its rivals in modernizing production facilities in an industry where production technology standards play a key role in deciding competitiveness. South Korean creditors, who have led the restructuring of the country's indebted companies since the 1997-98 financial crisis, offer debt-to-equity swaps to cut debt while rebuilding the capital base for indebted but commercially viable companies. However, creditors also approved a plan to combine every 21 shares in Hynix into one, another method widely used in South Korea before fresh capital is injected into a troubled company. This is aimed at preventing a company's share capital from being artificially expanded through a debt-to-equity swap. The reverse share split followed by a debt-to-equity swap, expected to take place in April, will reduce Hynix's outstanding number of shares to 440 million from the current 5.2 billion. This will also cut the company's debt-to-equity ratio down to 71 percent from 147 percent now. On the Seoul stock market, which dived over four percent on Monday on fears over geopolitical tensions, Hynix shares at one point rose by as much as five percent and then settled down to finish at 280 won -- down 1.75 percent on the day. This complicated refinancing work, however, will be implemented in conjunction with additional self-rescue efforts from Hynix and the chipmaker will have to sell off assets designated as not being core parts of the company's business in terms of profitability and efficiency. Hynix has recently agreed to sell its flat panel display business to China's BOE Technology Co. for $380 million, although more than half of the money will be paid by Hynix's creditors in the form of loans to the buyer. On Monday, Hynix said it has agreed in principle with a domestic consortium to sell all of its 47.3 percent stake in a computer monitor making unit for 45 billion won. In addition, Korea Exchange Bank said it has been talking with unspecified partners to sell Hynix's system integrated circuits business. It did not disclose more details.