Korea Exchange Bank said other creditors of Hynix Semiconductor Inc can opt out of its stalled bail-out for the third-largest chipmaker, provided they write off seven-tenths of their loans.
Hynix's biggest creditor made the proposal while increasing the amount of money it says the chipmaker needs to stay in business from US$5.4 billion to US$6 billion, in what would be the company's second rescue package in four months.
KEB needs the agreement of creditors holding 75 percent of Hynix debt to force through its proposal and wants lenders blocking the plan to agree or pull out. Hynix shares closed 5.3 percent higher at 900 won on hopes a pact can be reached that will keep the company in business.
"The proposal, if accepted by the banks, will help pave the way for the long-stalled bailout of Hynix," said Sohn Dong-shik, who helps manage 800 billion won (US$618 million) in Korean assets at Mirae Asset Investment Management Co in Seoul.
The price KEB's asking may be too high for some of the dissenting banks, Kookmin Bank, H&CB, Shinhan Bank, Hana Bank and Korea First Bank. They own 16.9 percent of the debt.
Creditors reluctant to lend more money to Hynix will be asked to forgive 70 percent of their loans and convert the rest into shares in the chipmaker at 3,100 won each, Korea Exchange Bank said.
"The penalty for wanting out of the bailout program is ridiculous," said Lee Soo-ho, chief credit officer at Korea First Bank. "We might as well say no to the whole proposal and exercise an option for our debt to be bought back" by the other lenders.
H&CB said it is "positively considering" the proposal.
KEB's package now includes 4 trillion won of debt to be exchanged into Hynix shares, 1.2 trillion won of bonds to be rolled over by investment trusts, 1 trillion won of new loans, 1 trillion won of new shares to be sold by the company and the extension of 500 billion won of loans to non-bank lenders.
Creditors will discuss the proposal at a meeting tentatively set for today, said Chung Hyung Ryang, head of Korea Exchange Bank's credit risk division.
The bailout stalled because Kookmin and four others opposed giving new loans to a company losing money as it makes chips at below the cost of production. Hynix is also saddled with 8.6 trillion won of debt that contributed to a bigger-than-expected 1.6 trillion won loss in the third quarter.
"What Hynix really needs now is more money for its operation, not just reducing its debts," said Kang Eon Ku, who manages 330 billion won at LG Investment Trust Management Co in Seoul.
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