WSJ: Hynix Creditors Plan to Bid for Assets After $4 Billion Proposal by Micron
By TERHO UIMONEN and SUH HAE SUNG
Staff Reporters of THE WALL STREET JOURNAL
SEOUL, South Korea -- Creditors of Hynix Semiconductor Inc. said they plan to present a counterproposal to a $4 billion bid from Micron Technology Inc. to buy key assets of the debt-ridden South Korean chip maker.
A recent jump in prices of computer memory chips, which has helped to stem losses at Hynix, has strengthened the bargaining position of Hynix and its creditors, industry officials said. And analysts said the urgency behind a global consolidation of memory-chip manufacturers has abated amid the three-month-old rally in memory-chip prices. Benchmark 128-megabit dynamic random access memory, or DRAM, chips are selling for around $4 each, up from a low of less than $1 in early November.
There appear to be two hurdles to a deal between Hynix and Micron: a disagreement between Micron and Hynix over how much fresh capital Hynix will need after it is sold, and Micron's reluctance to assume any financial responsibility for the nonchip businesses of Hynix. The U.S. chip maker had offered to pay for Hynix's memory-chip operations in stock and cash, but also asked for $1.5 billion in fresh loans, officials of creditor banks said following a meeting Monday. Several of the 12 creditors that attended the meeting suggested revisions to the terms of the offer.
The two sides will continue to negotiate, and the creditors expect to have a counterproposal ready "hopefully soon," said Lee Youn Soo, a vice president at the Korea Exchange Bank, one of Hynix's main creditors. "There are many areas that need to be further discussed among creditors before we could send a revised proposal," he said.
Earlier Monday, Hynix added another twist to the negotiations, which started in early December. It said in a statement that its board of directors had discussed the possibility of the company surviving on its own -- if given full support from creditors. But the creditors didn't discuss that option in Monday's meeting, officials said. "We aren't at a stage to discuss the stand-alone plan for Hynix yet," said Lee Choi Hwi, executive vice president of Hanvit Bank.
The board also has authorized Hynix's management to enter into a nonbinding agreement with Micron on the conditions that the U.S. chip maker takes a minority stake in Hynix's nonmemory business to assure its viability, and that the creditors fully agree on the terms and conditions, Hynix said in the statement.
Despite their differences, the two sides still are expected to reach an agreement, because a deal with Micron remains Hynix's best option for ensuring the long-term competitiveness of its memory-chip business, said Thomas Chang, vice president at Mosel Vitelic Inc., a Taiwan DRAM company.
Another potential Hynix suitor, Germany's Infineon Technologies AG, the world's fourth-largest DRAM maker, last week pulled out of alliance talks with Hynix, saying that it instead intended to pursue tie-ups with smaller Taiwan DRAM makers.
A merger of Micron and Hynix's DRAM operations would create the world's largest memory-chip maker, ahead of Korea's Samsung Electronics Co. Hynix's nonmemory-chip business makes up around 28% of the company's sales, while memory chips account for the rest.
Analysts say Hynix would require new loans of at least one trillion won ($762.7 million) to have any chance of surviving alone. The company also would need its creditors to write off about 30% of its current debt, an unlikely scenario. Hynix had a total of 8.64 trillion won in debt at the end of last year, which could be lowered to about five trillion won after creditors complete a planned debt-to-equity swap in May. The company has a separate $1.14 billion (1.495 trillion won) in foreign debt.
"We can't consider any further write-off," said Hanvit's Mr. Lee.
Write to Terho Uimonen at terho.uimonen@awsj.com and Suh Hae Sung at hae-sung.suh@dowjones.com
Updated February 19, 2002 12:01 a.m. EST
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