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Hynix Board Approves Creditor Bailout Plan

Online Staff -- Electronic News, 1/30/2003

Even as Hynix Semiconductor Inc. today said its Q4 net loss was $786.5 million and $1.7 billion for all of 2002, its board endorsed creditor's latest plan to bail out the company, according to news reports from South Korea.

The Q4 results apparently came unexpectedly just hours after the South Korean DRAM chipmaker's creditors pledged support for a rescue plan that would sell almost $1 billion of non-core assets in ant attempt to bail out the financially troubled company, Reuters reported.

Hynix said it has signed a memorandum of understanding with its main creditor, Korea Exchange Bank, just two days after Hynix's board members agreed on a refinancing deal. That involves swapping some debt into equity and rescheduling the remaining loans to keep the chipmaker from folding, according to Reuters. Creditors plan to exchange approximately $1.6 billion (1.9 trillion South Korean won) of debt into equity and reschedule the remaining $2.6 billion (3 trillion SKW) of maturing debt.

The creditors, who already own 70 percent of Hynix through previous bailout plans, will also merge every 21 shares into one to reduce the face value of equity capital by 95 percent to $1.1 million (1.3 trillion SKW) from $22.5 million (26.2 trillion SKW), Reuters reported.

Hynix creditors approved the deal at the end of last year. The move has upset DRAM competitors Infineon Technologies AG and Micron Technology Inc., who have said the bailout plan is tantamount to unfair if not illegal subsidies.

Hynix's Q4 loss of $786.5 million (917.1 billion SKW) grew from a Q3 loss of $529.6 million (617 billion SKW), but was still better than the year ago figure of $1.8 billion (1.4 trillion SKW). Hynix's Q4 sales rose 48 percent to $640.7 million (746.4 billion SKW) after the company increased shipments of higher-margin memory such as DDR, Dow Jones reported.

Hynix's 2002 net loss of $1.7 billion (1.948 trillion SKW) down considerably from $4.4 billion (5.074 trillion SKW) posted in 2001. But full-year revenue fell from $3.3 billion (3.893 trillion SKW) posted in 2001 to $2.6 billion (3 trillion SKW) last year.

Hynix said full-year revenue fell because of the spin-off of nonsemiconductor operations, such as its thin-film-transistor liquid-crystal display business, as well a delay in recovery of DRAM demand, soft chip prices in the second half of 2002, and the costs of reactivating of its manufacturing facility in the U.S., Dow Jones reported.

Hynix sold its flat panel display business to China's BOE Technology Co for $380 million. The sale was finalized this month but Hynix chose to reflect the loss in its Q4 results, Reuters reported.