TOKYO Hynix Semiconductor Inc. has received a $2.3 billion debt-for-equity swap that will allow it to reduce its debt payments this year. The fate of a further loan crucial for the company's capital spending plans is still unclear.
The swap agreement, reached Friday (Sept. 14), followed weeks of wrangling between the struggling Korean-based DRAM maker and a consortium of 18 creditor banks. The swap has given the company some breathing room as it seeks to repay debts due in the final quarter of this year, said a Hynix spokeswoman. Details on the timing and amount of the adjusted repayments have not been finalized, she said.
"This debt-equity swap will ease our debt burden but we will soon need 500 billion won [$385 million] for capex and technological updating," she said.
The uncompleted loan presents another huge issue for the DRAM maker as it attempts to keep pace with competitors, sources said.
Korea Exchange Bank president Kim Kyung Lim cited global economic uncertainty following last week's terrorist attacks on the United States as a primary reason for stalling a decision on loaning Hynix more cash. Korea Exchange is one of the principle banks arranging the bailout. Last week's closure of the U.S. Stock Exchange also froze an attempt by Hynix to sell a 17 percent stake in disk drive maker Maxtor Corp. for $154 million. It is not clear when both issues will be decided, the Hynix spokeswoman said.
Simon Woo, an analyst for Hyundai Securities Ltd. (Seoul, South Korea), said three of Hynix's creditor banks Shinhan Bank, Kookin Bank and Korea Housing and Commercial Bank are reluctant to bail the company out. "Very few creditors are willing to pour extra money into Hynix, which has reached junk bond status and is viewed as an uncertain entity," he said.
Hynix's shares closed down 14.6 percent on Monday on the Korean Composite Stock Price Index, and are edging near their all-time low.
There are some rays of hope for Hynix's midterm survival, said Woo. Earlier this month it sold its TFT-LCD company to a consortium lead by Taiwan-based Cando Corp. Hynix will become a 19.9 percent minority shareholder and will receive a vital cash injection of $400 million as early as November, said Woo. Longer term, the company will receive $150 million related to the purchase and lease of certain buildings and structures.
Hynix had hoped to secure $1.1 billion from creditors and investor for capital expenditures through 2002, and planned to spend about $385 million this year. The company is due to ramp 0.13-micron DRAM production at the end of this year, which will help it remain competitive in the short to medium term, said Soo Kyoum Kim, senior manager of International Data Corp.'s semiconductor division in Seoul.
But Hynix's years-long cash shortage has seriously undermined its capacity requirements, Kim said. The company will also face a serious lack of up-to-date equipment late next year if it can't find cash to but new equipment, he said.
"Technologically, Hynix still has the skills to win the game, but they need the cash to expand to new DRAM capacity," Kim said. "This is the critical issue and why they asked for the loan."