Hynix Semiconductor Inc sold US$1.25 billion of shares to overseas investors, bankers involved and fund managers said, helping it avoid bankruptcy by satisfying conditions imposed by South Korean creditors to reschedule US$4.4 billion of debt falling due this year.
The world's third-largest computer-memory chipmaker sold the shares at 24.5 percent less than their closing price yesterday, luring investors even as weak demand for the company's main product pushes prices below the cost of production and makes it harder for it to repay debt. Investors remain wary.
"The deal is done but they are not out of the woods yet," said Henry Lee, managing director of hedge fund Hendale Group Ltd.
"The business still looks like it's going to be in the doldrums for a while." Hynix's ability to convince foreign investors may bode well for upcoming sales by Korea Telecom Corp and other state-run companies. The South Korean government promised the International Monetary Fund to allow more foreign ownership of industry in return for a US$57 billion loan to repay debt.
The company, formerly Hyundai Electronics Industries Co, is trying to convince investors it can become profitable again and that it can maintain the support of Korea Exchange Bank and other creditors. Making this difficult is a 60 percent fall in prices for dynamic random access memory, or DRAM, chips this year.
Hynix's task has been further complicated as more companies warn of falling earnings due to slowing demand. DRAM chip prices fell this year as Dell Computer Corp and other computer makers forecast slowing sales.
Silicon Storage Technology Inc, a maker of flash chips, recently cut its forecast for second-quarter profit, citing sluggish sales and a slump in orders. Rival Integrated Device Technology Inc said it will sack about 18 percent of its workers as demand falls.
Hendale's Lee said he would not rule out another equity or a bond sale by the company if DRAM prices do not rebound in the next 12 months.
Hynix sold more than 104 million global depositary shares for US$12 each. One GDR represents five ordinary shares.
Salomon Smith Barney Inc marketed the shares for the past four weeks and underwrote the stock offer, helped by Deutsche Bank AG, ING Barings, Nomura Securities Co, SG Cowen Securities Corp and LG Securities.
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