SEOUL, South Korea – After recently scrapping its plan for an initial public offering (IPO) in the U.S., South Korean chip maker MagnaChip Semiconductor Ltd. said it may revisit the IPO again in the future.
This depends upon market conditions and other factors, according to executives from MagnaChip (Seoul), the logic and foundry spinoff of Hynix Semiconductor Inc.
It has been a roller coast ride for the chip maker. The company, a maker of analog and mixed-signal ICs, filed for an IPO with the U.S. Securities and Exchange Commission (SEC) in November of 2007, with an offering valued up to $575 million. But in a regulatory filing, it withdrew that IPO filing in January 2009.
Then, the company filed for Chapter 11 bankruptcy protection in June 2009, as it fell into massive losses and debt. The company subsequently sought bankruptcy protection before a reorganization under which Avenue Capital Group, an investment firm, acquired a 70 percent stake in Magnachip. According to a filing, Avenue still owns a 70.2 percent stake.
In March of 2010, MagnaChip filed again with the SEC for an IPO that was to raise up to $250 million in March 2010, before pricing it more modestly at $130 million in June 2010.
Then, in June of 2010, MagnaChip scrapped the IPO due to "adverse market conditions." At that time, the overall stock market fell by some 30 percent in three days, causing MagnaChip to re-think and drop the IPO, explained Sang Park, chairman and CEO of the chip maker, in a recent interview at the company’s headquarters here.
Park said the company is still in a good cash position even without the IPO. ''We did not have to do an IPO,’’ he told EE Times. ''We have a lot of cash as a buffer.’’
Still, MagnaChip is keeping its options open and may revisit the IPO at some point. ''We still have the S-1 open,’’ he said, referring to the document filed at the U.S. SEC.
In an updated S-1, the company disclosed the following about the recent sale of its senor notes. ''On April 9, 2010, we completed the sale of $250 million in aggregate principal amount of 10.500% senior notes due 2018, which we refer to as our senior notes. Of the $238.4 million of net proceeds, which represents $250 million of principal amount net of $3.3 million of original issue discount and $8.3 million of debt issuance costs, $130.7 million was used to make a distribution to our unitholders and $61.6 million was used to repay all outstanding borrowings under our term loan,’’ according to the filing.
''The remaining proceeds of $46.1 million were retained to fund working capital and for general corporate purposes. As a result of our higher level of indebtedness from our senior notes offering, our interest expense will increase above that which was reported for the six months ended June 30, 2010 to approximately $13.6 million per semiannual period,’’ according to the filing.
As before, the company continues to sell its own products and also provides foundry services. On the product front, which represents nearly half of its total sales, it provides LCD drivers, LED drivers, MOSFETs, analog switches, DC-to-DC converters and other products.
On the foundry side, it provides a range of analog and mixed-signal processes. At present, the company owns one 6-inch fab and three 8-inch plants. In recent times, the company expanded its fab capacity by 20 percent to meet strong demand for its products and services, said Brent Rowe, president of the company's U.S. unit and senior vice president of worldwide sales.
MagnaChip did not provide a forecast for its upcoming results. It did say the outlook is a mixed picture for the entire IC industry. In the first half of 2010, demand was strong and ''there were spot shortages’’ in the market, Rowe said. ''I think the market is mixed right now.’’
In July, MagnaChip announced its results for the second quarter ended June 30. Revenue for the second quarter of 2010 was $194.7 million, an 8.5 percent increase compared to $179.5 million for the first quarter of 2010, and a 39.4 percent increase compared to $139.7 million for the second quarter ended June 30, 2009. Revenue exceeded the top end of MagnaChip’s expectations due to continued strong demand for its mixed-signal analog products and foundry services.
Net loss, on a GAAP basis, for the second quarter of 2010 totaled $30.7 million or $0.10 per diluted common unit. This compares to net income of $31.1 million or $0.10 per diluted common unit for the first quarter of 2010 and net income of $27.6 million or $0.46 per diluted common unit for the year-ago quarter.
Net loss, for the second quarter of 2010, was negatively impacted by a foreign currency loss of $48.3 million compared to a foreign currency gain of $21.6 million and $30.8 million for the first quarter of 2010 and second quarter of 2009, respectively.
The company anticipates third quarter 2010 revenue will increase 7-to- 9 percent on a sequential basis.