Hynix article. [Bloomberg]
Hynix Creditors to Discuss Chipmaker's 3rd Bailout (Update2)
By Heejin Koo and Ian King
Seoul, Nov. 25 (Bloomberg) -- Hynix Semiconductor Inc.'s major creditors will meet tomorrow to discuss a possible third bailout in two years for the world's third-largest maker of computer memory chips.
Korea Exchange Bank, Woori Bank, Citibank NA and other creditors will be advised by Deutsche Bank AG to swap 1.85 trillion won ($1.5 billion) of debt into shares and delay payment on the rest, the Maeil Business Newspaper reported today.
The banks, owed 6.2 trillion won, own 67 percent of the chipmaker after swapping debt for shares in June and have refused to lend it new money. Yet shuffling the existing debt may not be enough to keep the chipmaker in business, some analysts say.
``Even with a debt write-off, Hynix needs more money if it wants to upgrade its facilities and remain competitive,'' said Koo Hee Jin, an analyst at LG Investment & Securities Co.
Hampered by debt and losses, Hynix has been unable to keep up with rivals in the $11 billion memory-chip industry. Chipmakers need to invest billions of dollars a year to develop more powerful chips and harness technology that permit more chips to be made from the same amount of material.
The latest memory chips, called double data rate, or DDR, chips, sell for more than twice those made with older technology. Some 30 percent of Hynix's production is DDR, compared with about 60 percent at market leader Samsung Electronics Co.
Hynix this month posted a third-quarter net loss of 617 billion won and is on course for its fifth annual loss in six years.
Samsung, which regularly outspends rivals, reported net income of 1.73 trillion won for the quarter and was the only memory-chip maker worldwide to post a profit last year. It has said it will invest 4.9 trillion won in equipment, plants and technology this year -- more than 10 times what Hynix was able to spend last year. Hynix hasn't disclosed its spending for this year.
Choices?
Deutsche Bank was hired by creditors to advise on what to do with the ailing chipmaker.
At tomorrow's meeting, ``the chiefs will discuss which method will be the most appropriate to recommend to all the remaining creditors,'' said Lee Sung Shik, a Korea Exchange Bank spokesman.
Heads of major creditors banks will meet in the morning. A steering committee meeting will be held about 2 p.m. and a meeting with all creditor institutions will be held in the afternoon, Korea Exchange Bank said.
Hynix shares rose as much as 14 percent and traded at 25 won, up 5.7 percent, at 2 p.m. in Seoul.
Last month, Korea Exchange Bank Chief Executive Lee Kang Won said creditors remain committed to selling the chipmaker.
June's bailout and takeover of the company by creditors came after Hynix's board ended five months of negotiations to sell the chipmaker to U.S. rival Micron Technology Inc. by rejecting a $3 billion offer.
Since the breakup of the talks, Hynix's shares have fallen by half while Micron's shares, which it proposed using to fund the purchase, have shed 32 percent.
``Creditors won't find it easy to find a buyer unless conditions in the memory-chip market improve drastically,'' LG Investment's Koo said.
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