Thu, May 10, 2001 page21

• Hynix shares fall even as debt agreement looks close

  OVERPRICED Investors took advantage of the 28 percent rise in the chipmaker's shares over the past two weeks amid government moves to broker a deal with creditors

  • BLOOMBERG
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  Hynix Semiconductor Inc shares fell 6.4 percent as investors found them expensive after a 37 percent rally in the previous six sessions, even as the company moved closer to a US$3.8 billion debt reorganization agreement.

  Hynix rose as much as 6.7 percent in early trade even after credit-rating company Standard & Poor's said Tuesday that the company's "B-minus" rating would remain on watch for possible downgrade until a tentative agreement among its creditors to provide more funds was completed.

  "It looks like investors sold Hynix shares to take advantage of their recent gains," said Lee Young Seog, who manages 300 billion won at Dongwon BNP Investment Trust Management Co.

  "Investors may have also sold the shares because there haven't been any significant signs of a recovery in chip prices to help sustain the shares' recent rise." Lee doesn't own any Hynix shares.

  Shares in the world's third-largest maker of memory chips for computers have risen 28 percent in the past two weeks as the government has moved to broker an agreement between the company and its creditors on how and when it will repay its debts. The Korean government wants to shore up confidence in Hynix, which accounts for 5 percent of the nation's exports.

  "Hynix's survival is already expected," said Lee Jong Woo, a strategist at Daewoo Securities Co. "Banks will bow to the government's will." Creditors have said they will give Hynix more time to repay 1.5 trillion won (US$1.2 billion) of loans and will refinance 1 trillion won of bonds.

  Hynix is expected to sell an additional 680 billion won of bonds and to receive an extension on a US$1.4 billion export overdraft until next year under the plan being discussed by creditors, many of them state-owned.

  The company has been struggling to keep up payments on 5.7 trillion won of debts coming due this year -- three-quarters of its total -- as its earnings are hit by slumping product prices.

  Bankers said the rescue plan is conditional on 16 local investment trusts, which have been asked to buy 680 billion won of new bonds from Hynix.

  The trusts are demanding that state-run Seoul Guarantee Insurance Co agrees to back most of the bonds.

  Seoul Guarantee spokesman Heo Nam Heon said his agency was deciding yesterday whether to guarantee the bonds that day.

  Korea Exchange Bank, the company's main creditor, received written pledges from several other creditor banks to buy 1 trillion won of bonds convertible into Hynix stock, and expects more pledges once bankers return from the Asian Development Bank meeting in Honolulu this week, KEB spokesman Jeon Hong Chan said.

  "Korea Exchange Bank has received most of the pledges from banks, but a few have not been submitted yet," he said. KEB is expecting to receive all pledges very soon. The funds are conditional on the trust companies agreeing to buy bonds from the chipmaker.

  Hynix plans to use the proceeds to repay most of the 1.2 trillion won of bonds that will mature in the first half of next year, said Brenda Lee, a Hynix finance official.

  In addition, the lender would be given until the end of June 2002 to repay a US$1.4 billion export overdraft, which must be lowered to US$400 million by the end of the first half of 2003.

  Creditors would also extend repayments on 1 trillion won of loans due for repayment in 2002 until 2004, and on 500 billion won of loans coming due in 2003 until 2005.

  Hynix shares fell to 3930 won, having been as high as 4480.

  The 14-day relative strength measure for the stock, which is derived by averaging out daily gains and daily losses over two weeks, stood at 71 yesterday. A reading of more than 70 usually indicates a stock is poised to fall.
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