Hynix Semiconductor Inc, the world's third-largest computer-memory chipmaker, plans to sell US$1.25 billion of shares tomorrow at a discount to their close yesterday of as much as 25 percent, investors said.
Salomon Smith Barney Inc, which has been marketing the shares for Hynix the past three weeks, sent an electronic mail to investors saying the shares will be sold at between 3,100 won and 3,500 won each, said Devan Kaloo, a fund manager at Aberdeen Asset Management in Singapore.
Hynix is prepared to offer a discount because it needs to raise the money as a condition imposed by Korean creditors to reschedule more than US$4 billion of debt due this year. The company won't be any closer to repaying that debt unless prices for its main product, dynamic random access memory chips, can recover from a 60 percent slump this year.
"The share sale saves the company from immediate bankruptcy," said Alain Barbezat, who helps manage US$500 million in Asia ex-Japan at Darier Hentsch Asia Ltd in Hong Kong. "How they are going to make enough money to upgrade and invest in their future remains unclear."
Hynix Wednesday increased its planned share sale from its original US$800 million and dropped a bond sale, as its bankers said there was enough demand for its shares to avoid adding to its debt. This raised expectations among investors of a successful sale and of Hynix's chances of staying in business.
Still, some investors said they are not sure how long the company can survive if memory chip prices stay at current levels.
Dynamic random access memory chips fell this year, as Dell Computer Corp and other computer makers forecast slowing sales.
Silicon Storage Technology Inc, a maker of flash chips, Wednesday cut its forecast for second-quarter profit, citing sluggish sales and a slump in orders, while rival Integrated Device Technology Inc said it will cut about 18 percent of its workers as demand falls.
Hynix's shares are down 10.4 percent the past two days, its largest such decline in nearly a month, as investors speculated the new shares would be priced at a discount to their current market value.
The shares will be priced tomorrow after the Korea close.
Company spokesman Kim Seung Soo Wednesday denied reports it will sell its new shares at between 3200 won and 3700 won, a discount of as much as 23 percent from yesterday's close. The bottom of the offered range is 4.7 percent more than the minimum sale price agreed earlier by shareholders and management.
"It's usual for investors to ask for a discount when asked to invest in a company in Hynix's situation," said Chris Ong, who helps manage US$2.5 billion in stocks at BT Funds Management in Sydney.
Yesterday Kim said the company "hasn't and won't be saying anything about the share sale until the price has been set." Salomon officials were unavailable to comment.
Deutsche Bank AG, ING Barings, Nomura Securities Co, SG Cowen Securities Corp and LG Securities are also helping sell the securities.
RSS