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Thu, Aug 23, 2001 - Page 21 News List

Debt-for-equity swap considered by Hynix lenders

LIFESAVER Creditors are reviewing a deal that could help the troubled chipmaker stay in business

BLOOMBERG , SEOUL

Hynix Semiconductor Inc creditors are considering exchanging debt for shares in the company as they try to keep the world's third-largest computer-memory chipmaker from default and allow it to spend on its future.

"We are reviewing various measures, including a debt-for-equity swap and other financial support," said Lee Youn-soo, a senior managing director at main creditor Korea Exchange Bank.

"At this moment, it is only a review." Yonhap News said lenders were discussing exchanging 3 trillion won (US$2.3 billion) of debt for shares and "other measures," without citing sources. Lee declined comment.

Hynix faces the double challenge of meeting repayments and investing in equipment needed for it to remain competitive while the price of its main product remains below the cost of production.

Earlier this month, Hynix, which owes more than seven times its market value, and its adviser, Salomon Smith Barney Inc, met creditors to discuss its finances, a little more than a month after lenders agreed to reschedule more than US$4 billion of debt.

The spot price of the industry-standard PC133 8X8 64 megabit dynamic random access memory chip was at US$0.80 per chip yesterday. That is less than half the price it costs to make them.

The company originally planned to spend about 1 trillion won on equipment this year -- less than a fifth of the original budget of its largest rival, Samsung Electronics Co -- and an amount that was reduced by 40 percent after losses mounted.

Hynix said it lost 2.1 trillion won (US$1.6 billion) from January through June. It had 2.7 trillion won of debt due this year, according to research published by Salomon Smith Barney on May 18 and distributed to money managers prior to its June share sale.

The company raised US$1.25 billion through an overseas share sale, a condition of the first bailout by local creditors who agreed to reschedule more than US$4 billion of its debts.

KEB's Lee said creditors, which will try to set up more meetings by the end of the week, may be reluctant to increase their exposure to the company.

"They wouldn't like to put new money into the company," he said.

Hynix's "B" long-term credit rating may be cut, rating agency Standard & Poor's said yesterday, citing "the severity of Hynix's liquidity difficulties."

S&P said it will review the ratings if KEB and other creditors come up with a new financing package for Hynix.

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