The South Korean government said for the first time that Hynix Semiconductor Inc, the third-biggest computer memory chipmaker, may be forced into court receivership if it fails to get its second bailout in three months.
"If Hynix creditors fail to reach agreement, Hynix will have to go into court receivership or seek other measures," Finance and Economy Minister Jin Nyum said on a South Korean radio station.
Hynix creditors, including Citigroup Inc, are set to decide Monday on whether to approve a 5.2 trillion won (US$4.1 billion) rescue. The company, whose chips sell below production costs, needs more money to acquire technology and stay competitive with bigger rivals Samsung Electronics Co and Micron Technology Inc in the US$30 billion industry.
By raising the possibility of receivership, the government may be signaling Hynix is beyond help, some investors said. Hynix, which lost US$1.6 billion in the first half, must repay most of its 7.2 trillion won of debt this year. Its stock fell 50 percent in the past week, closing today at a record 830 won.
The minister's remarks prompted an immediate rejoinder from Hynix President Park Chong Sup. "
"If people understand the semiconductor industry, they would not mention the extreme possibility" of receivership, he said.
Creditor banks are meeting today and tomorrow with Salomon Smith Barney Inc, the chipmaker's financial adviser, to review the bailout proposal. They will meet again to decide whether to approve it on Monday. Under the proposal, Hynix would sell 500 billion won of shares to its investors. It also wants banks to swap 3 trillion won of debt for equity.
Investors aren't likely to buy more Hynix shares after the stock price tumbled 80 percent since a June bailout and overseas share sale, also arranged by Salomon, that raised US$1.25 billion.
Banks could also be wary because their exposure to the chipmaker already stands at 6.4 trillion won. Should investors balk at the rights offer, or the bailout fails, Hynix would be left with few funding options. The government has repeatedly said it won't step in to help.
"The government has no intention of interfering in creditors' decision over Hynix," said Jin. "I totally leave this matter for the market arkets to decide."
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