Creditor banks yesterday took control of Hynix Semiconductor Inc's finances and froze debt payments to avoid the collapse of the world's third largest microchip maker, officials said.
The "creditor receivership," endorsed at a meeting of 104 creditors, was aimed at avoiding the company's bankruptcy until it gets fresh loans, said a Korea Exchange Bank (KEB) official.
"Hynix was placed under joint control by creditors from today," the KEB official said. The company will be allowed to defer debt repayments until Jan. 3.
Creditors will control money flows and monitor implementation of Hynix's restructuring program, but there will be no change in the current management.
"If Hynix fails to meet its restructuring target, creditors will cut any further credit line or file for court receivership. We are not taking over its management," the KEB official said.
Earlier it was announced that Hynix liabilities to financial institutions had blown out to about US$6.6 billion and the creditors made no decision on a proposed injection of one trillion won (US$760 million) of new loans, the official said.
The former Hyundai Electronics Co, which was separated from the embattled Hyundai Group in August, desperately needs cash but a rescue package has been delayed by disagreement among creditors over whether to extend new loans. KEB and Hynix's financial adviser, Salomon Smith Barney, have sought to promote a plan for a US$5.2 billion debt-for-equity swap and debt rollover with new loans.
The bank has, however, received a cool response from other creditors who still have doubts about Hynix's ability to survive the slump in the global memory chip industry.
Some creditors believe Hynix has little chance of getting its management back on track.
Market watchers have warned the collapse of Hynix would lead to a chain of bankruptcies among subcontractors and new problems for South Korea's banks, which are already stretched.
Analysts put the total amount of the new loans required at about four trillion won over the next five years, warning Hynix could default this year without support. Hynix has an estimated 12 trillion won (US$9.2 billion) in debt to institutions and foreign companies.
KEB said Hynix now owes 8.64 trillion won (US$6.6 billion) to bank and non-bank institutions, up from 7.2 trillion won at the end of June.
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