Hynix Semiconductor Inc may not get a new 500 billion won (US$388 million) loan the third-largest computer memory chipmaker needs to stay in business, threatening plans for a bailout, its second in three months.
Hynix creditors are meeting tomorrow to vote on a US$5.4 billion bailout, part of which is the new loan and that includes a debt-for-equity swap. Shinhan Bank said it will refuse to provide more money and Kookmin Bank said it is also likely to refuse to increase its exposure to the company.
"We cannot agree to give fresh loans," said Seol Young Oh, Shinhan's credit risk official overseeing Hynix loans. "We will sign on for the debt-for-equity swap."
The loan is crucial for Hynix. Korea Exchange Bank, the company's biggest credit said banks will be asked to vote on the proposal as a whole rather than choose parts of the debt-for-equity swap, new loan and loan extension package.
The company needs cash to pay for operations that are losing money through selling products at less than they cost to make and on new equipment that it needs to keep up with competitors that are improving their production.
Kookmin Bank has yet to make a final decision, said Lee Deuk Young, the bank's deputy manager of the corporate restructuring office. The lender has told Korea Exchange Bank it might not participate in the loan.
Hynix also needs money because it's struggling to keep up repayments on debt of 7.3 trillion won (US$5.7 billion) of debt, more than six times its market value. Hynix shares, which have fallen 71 percent this year, rose 15 percent today to 1,165 won, giving it a market value of 1.2 trillion won.
Under the proposal banks are considering, Hynix wants shareholders to buy 1 trillion won of new shares, creditors to buy 3 trillion won of bonds convertible into its stock and to extend repayment on 2.1 trillion won of debt, it said in a 28-page presentation shown to banks last week. The company is also asking banks to back a proposal to refinance 410 billion won of debt with a guarantee by a third party as well as the new loan. Korea Exchange proposed it and Hanvit Bank shoulder the portion of the 500 billion won loan that state-run lender Korea Development Bank has already refused to take up. Hanvit counter-proposed that other lenders share the burden.