A financial restructuring of Hynix Semiconductor Inc. isn't likely to occur for several months despite key recommendations last week by the company's financial adviser.
Dealing with Hynix's $5.1 billion debt burden is such a hot-button political issue that any final action is expected to be deferred until after the Korean presidential elections in December, according to analysts in Korea.
Major Hynix creditors are also wrestling with some of the proposals made by the company's financial adviser, Deutsche Bank A.G., Frankfurt, Germany, which urged $2.5 billion in debt forgiveness and a new $800 million convertible bond offering.
Deutsche Bank last week presented its long-awaited financial analysis and proposals to restructure the company, according to Farhad Tabrizi, vice president of worldwide marketing at Hynix, San Jose. The report urged creditors to forgive half of the current $5.1 billion in debt to put Hynix in financial shape to continue independently, Tabrizi said.
Creditors "are now digesting the Deutsche Bank report and will meet later this month to consider what actions they will take," he said.
Any financial help will likely involve the Korean government, which owns or controls a majority of the creditor banks that hold the largest share of Hynix debt, according to analysts in Korea.
"It's such a political issue that all parties will be forced to wait until the presidential elections have been held," said Woo Jong Jon, an analyst at SK Securities, Seoul.
The major creditor banks are reluctant to write off the large amount of Hynix debt proposed by Deutsche Bank, said an investment analyst with ties to Hynix who spoke on condition of anonymity. It's unclear how Hynix's foreign rivals would react if government-connected creditor banks forgive $2.5 billion of Hynix's debt.
Infineon Technologies A.G., Munich, Germany, has protested to the European Commission that in previous bailouts, the government has subsidized Hynix with money funneled through the controlled banks. An Infineon spokeswoman said the chipmaker had no comment on the most recent proposal.
Micron Technology Inc., Boise, Idaho, at first raised the same complaint but backed away last year when the company was negotiating a deal to acquire six DRAM fabs from Hynix.
Deutsche Bank also suggested that Hynix raise capital by floating a new $800 million issue of convertible bonds. Analysts were uncertain what reception such a securities offering would receive.
The Deutsche Bank report also strongly advised the sale of noncore assets outside Hynix's main DRAM business, Tabrizi noted. He said the company continues to seek buyers for its foundry, logic-IC, and LCD-panel business units, as well as various real estate properties.
Hynix has a production rate of 230,000 8in.-wafer starts a month. The company expects to make more than 800 million 128Mbit-equivalent DRAMs this year, Tabrizi said. OR