Hyundai Electronics Needs $3B to Survive Debt Load
May sever ties with Hyundai chaebol
By Ahn Mi-Young
Seoul, South Korea — Hyundai Electronics Industries Co. Ltd. (HEI), one of the world's largest DRAM chipmakers, recently said it will raise $3 billion (3.5 trillion won) through loans and sales of assets by the end of 2001. The Korean giant hopes to become a viable new unit, independent from the debt-laden Hyundai Group, according to Park Chong-sup, president and chief executive officer at HEI.
"By severing ties with Hyundai Group, Hyundai will be reborn as an independent entity and will become like a U.S.-style shareholders' company that is managed by a board of directors and without any large shareholders," Chong-sup said in a press conference recently.
In 2000, HEI sales revenue is expected to reach $8.3 billion (10 trillion won), however, this is compared to its total debt that stood at $7.2 billion (8.8 trillion won) as of the end of September.
The problem is that 73 percent of the company's total debt is going to mature in the next 15 months, Chong-sup revealed, creating an emergency recapitalization effort for HEI to work out in order to ease investor worries about its cash flow and falling chip prices.
The company's contracted price for 64-Mbit DRAM chips sold to big PC makers, which generate 70 percent of the company's sales revenues, has dropped from $7.50 in the third quarter to $5.50 in the fourth quarter.
Most urgently, HEI needs to pay off $830 million (1 trillion won) in debt that matures this year. Because of this, the company has secured a 1-trillion-won syndicated loan from Korean banks to be lead-managed by Citigroup Inc.'s Citibank unit.
"In this regard, we ask for the support of the domestic financial institutions for an initial injection of one trillion won, which is vital in fixing our cash strain that is in fact no more than short-term liquidity mismatch," HEI's Chong-sup said.
To get additional loans from Korean banks, however, HEI has tried to convince them that the company will be severed from Hyundai Group by selling 12 percent of Hyundai's stake in HEI by the first quarter of 2001.
Each Korean bank has a 25 percent ceiling loan-limit vis-a-vis each business group's (chaebol's) paid-in capital. State Korea Development Bank, for instance, admitted that it has virtually exhausted most of the loan ceiling available to go to the Hyundai Group, leaving little available for HEI unless HEI is set free from its ties with Hyundai Group.
HEI has confirmed that the planned sales of HEI shares, managed by Salomon Smith Barney and Citibank, include a 9.3 percent stake held by Hyundai Merchant Marine Co.; a 7 percent stake held by Hyundai Heavy Industries Co.; a 1.7 percent stake held by Chung Mong-hun, the former Hyundai group chairman; and a 1.2 percent stake held by Hyundai Elevator.
Meanwhile, HEI said that in 2001 it will generate only 50 percent of its sales revenues from DRAM sold for PC use, down from 72 percent in 2000. It will achieve this by switching to higher-density 128Mbit or 256Mbit DRAMs for use in PDAs, servers and games. |
