Micron Technology Inc. as expected, said it will challenge the multi-billion dollar bailout of Hynix Semiconductor Co. as an unwarranted Korean government subsidy to keep the memory chip maker alive.
Amy Kleiner, Micron government affairs manager, said the company will ask the U.S. Trade Representative and U.S. Treasury Department to file an unfair government subsidies case against Korea at the World Trade Organization (WTO).
She said the six domestic banks that will convert their debt into equity and extend new loans to Hynix are either wholly or largely government-owned, and have been routinely receiving government money. "These banks can make improper financial restructuring of Hynix because they have the government money behind them," she charged.
Hynix confirmed today that domestic creditor banks had reached a bailout agreement for the firm, but provided no details.
According to Hynix vice president Farhad Tabrizi, the rescue plan includes a $500 million loan and a debt-to-equity swap of $2.38 billion. Reports from Korea indicated the banks agreed to rolling over $5.5 billion in other existing loans.
Ironically on the very day the domestic Korean banks struck a Hynix refinancing deal, a WTO committee on government subsidies held a regularly scheduled meeting in Geneva. Information from that meeting indicated that the U.S., the European Union, Japan and Singapore all voiced objections to the Hynix bailout.
Now that the agreement has been finalized, one or more of these governments are expected to file a formal protest to the WTO as they previously indicated they would do.
WTO would appoint a special panel to hear the complaint, a process that takes six to nine months to arrive at a ruling. Any panel decision is also subject to an appeal to the WTO itself. However, should a WTO ruling go against Korea, the subsidies involved would have to be withdrawn or the protesting countries could take sanctions against Hynix chips.