Hynix Semiconductor Inc can't count on global investors to provide about US$390 million it needs to stay in business, a survey showed, putting pressure on South Korean banks that have said they won't provide it with fresh funds.
Of 102 money managers investing in Asia who responded to a Bloomberg survey asking if they would participate in a share sale proposed by Hynix, 94 said they wouldn't. That may leave the third-largest computer memory chipmaker dependent on South Korean creditors meeting this afternoon to discuss bailing out the company for the second time in three months.
Without the support of overseas investors, who bought US$1.25 billion of shares in June, the 5.2 trillion won (US$4 billion) bailout will be harder to achieve. Banks which proposed swapping 3 trillion won of shares for debt said last week they are unwilling to provide more funds and buy the shares as part of the bailout.
``The best thing that could happen to the world semiconductor industry would be for Hynix to go bust, its factories to be flattened and turned into parking lots,'' said Scott McGlashan, who helps manage US$100 million at Jade Absolute Fund Managers in London.
Hynix needs the cash because its chip business is losing money. The spot price of the industry's standard 64-megabit PC133 8X8 dynamic random access memory chip was at US$0.75 per chip last Friday, which is about half what it costs Hynix and other makers to produce them. The price of these chips has been below the cost of manufacturing for about four months.
Hynix, which lost US$1.6 billion in the first half, must repay most of its 7.2 trillion won of debt this year. It also needs more money to buy new equipment and stay competitive with bigger rivals Samsung Electronics Co and Micron Technology Inc in an industry that had sales of US$30 billion last year.
The company's shares fell 3.6 percent to 800 won a record low. The company has a market value of 809 billion won, less than an eighth of its debt. The shares have fallen 74 percent since the share sale in June.
Bloomberg surveyed 944 fund managers who invest in Asia, asking them if they would buy Hynix shares. Of the 102 who responded, two of those who didn't say "no," said "probably not" while the rest said they didn't cover Korea anymore.
Korea Exchange Bank, the company's biggest creditor, and other lenders started talks this afternoon to consider swapping 3 trillion won of debt for shares in the company, the bank said.
Last week they said they won't take up any shares that weren't sold in a stock sale proposed by the company's financial adviser, Salomon Smith Barney Inc. Today an official at Korea Exchange Bank said "could consider a proposal to give the company an extra 500 billion won of loans to spend on facility investment."
Investors expect lenders to agree to swap some of the company's loans for a stake in the company, something which could dilute the value of existing shareholdings.
"Creditors banks will likely agree to the debt equity swap for now, even though they may feel it would be better for them in the long run to send the company to court receivership," Park Young-tae, who helps manage 1.5 trillion won (US$1.2 billion) in equities at Samsung Investment Management in Seoul. "They can't ignore the immediate repercussions in the local financial market of letting the company fail."
The start of the creditor meeting, taking place in Korea Exchange Bank's headquarters in downtown Seoul, was delayed by an hour to 4pm local time, said Jeon Hong-chan, a Korea Exchange Bank spokesman. Salomon will present new proposals at the meeting, he said.
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