Micron protests Korean government aid to Hyundai
ebnonline.com
hyndai dumpty sat on a wall....and I looks like their pal Micron os trying to push them off!
By Jack Robertson
EBN
(01/05/01, 06:15:37 PM EST)
In a controversial rescue effort reminiscent of its financial crisis three years ago, Hyundai Electronics Industries Co. Ltd. confirmed this week that the Korean government is buying billions of dollars in corporate bonds to ease the chip maker's cash-flow crunch.
A spokesman for Hyundai Electronics America in San Jose affirmed that the Korea Development Bank, a state agency, will purchase a total of $2.1 billion in new bonds to be issued by the company. Hyundai will use the funds to retire short-term bonds maturing this year that were issued after Korea's 1998 currency crisis, as well as to pay for the 1999 acquisition of LG Semicon Co. Ltd., the spokesman said.
The move evoked new cries of protest from Hyundai's U.S.-based DRAM market rival, Micron Technology Inc., which claimed the bailout violates World Trade Organization (WTO) rules. A spokeswoman for Micron, Boise, Idaho, said the company has asked Congress and the U.S. Trade Representative to take action in response to the Korean government's bond purchase.
Financial sources in Korea indicated that at about 8%, the Hyundai bonds will carry a much lower interest rate than the maturing bonds they are designed to replace. The Hyundai spokesman declined to comment on what interest rate the new one-year bonds will carry, but the company will need to generate enough cash in the next 12 months to retire the debt.
For its part, Micron charged that Hyundai was unable to sell a sufficient volume of bonds on its own, leading the Korean government to step in as a lender of last resort. The spokeswoman said this type of bailout violates a WTO rule that prohibits governments from improperly subsidizing private companies that are unable to raise funds in commercial markets.
Hyundai declined to respond to the allegation. The company late last year did sell $660 million in bonds on the commercial market through a syndicate of domestic banks and Citibank.
Micron is a major DRAM market competitor of Hyundai, which claims to be the global leader in terms of unit sales, and has been highly critical of any financial aid flowing to Korea's chip makers. That includes earlier International Monetary Fund reserves, which Micron claims in part were indirectly dispersed to Korea's debt-laden semiconductor industry.
Korea paid back the last of the IMF loans last month, and had earlier pledged not to finance the nation's chip makers-a promise Micron said the government is preparing to break.
Sang Park, president of Hyundai Electronics' Semiconductor/LCD division, told EBN last month that the company had pared by nearly half the outstanding debt load it amassed through borrowing and the LG Semicon merger, cutting it to about $6 billion. At the time, Park acknowledged that a large amount of short-term bond debt maturing in 2001 would have to be recycled.
Despite its cash position, Hyundai has continued to invest in upgrading semiconductor fabs to 0.15-micron processing. The company has equipped a former shell, Fab 8 in Chongju, and will go into initial production this month with 0.15-micron capability.
Hyundai last year had a semiconductor capital budget of approximately $1.5 billion, which it is expected to scale back to about $1.3 billion this year. |
