Hynix bailout on hold after U.S. attacks

CEO C.S. Park says Hynix, formerly Hyundai Electronics, can survive on its own. But it says it needs 600 billion won.

By Alex Frew McMillan
CNN Hong Kong

SEOUL, South Korea (CNN) -- Embattled chipmaker Hynix Semiconductor illustrates how Asian companies are suffering the indirect blow of last week's attacks in the United States.

The world's third biggest memory chip manufacturer was left in the lurch last week, as its creditors decided to put off a decision on lending it desperately needed cash.

Its lenders did agree Friday to swap 3 trillion won of the company's mammoth debt burden for stock in the company. They also rolled over its maturing debts until 2004.

But Korea Exchange Bank, Hynix's lead creditor, decided that the terror attacks had muddied the economic waters thoroughly.

Unable to sift through the dregs of last Tuesday's assaults, the 18 creditor banks couldn't make a clear call on whether or not to lend Hynix 500 billion won in fresh funds.

The banks broke discussions, unable to agree what the future held for the chip industry and big exports like Hynix. They don't have a date yet to reconvene.

The company needs that money badly. Its volatile stock was reacting like that was a realistic prospect on Tuesday, up the daily 15 percent limit to 975 won. Speculative retail buyers bid it up.

But its shares are just as likely to dip as much next trading day. They had dropped the 15 percent max the two previous days.

With Hynix burning cash at a furious rate just to service its debts, even its creditors have questioned how long the chipmaker can stay afloat.

Creditors like Hana Bank have at times voiced concern that fresh loans would just be prolonging the inevitable, unless the chip industry rebounds.

600 billion won needed

Hynix President Park Jong-sup told a parliamentary inspection group Monday that his company desperately needs 600 billion won to keep it afloat. The chipmaker would pump that money into capital spending, to improve its plants.

Prices of Hynix's main product, Dynamic Random Access Memory chips, have fallen 90 percent this year, dropping below $1 per chip.

Park said the company could line up 1.2 trillion won in funding on its own if chip prices broke above $1.50.

Still, Park felt Samsung may be over-investing by pumping 4.4 trillion won into its plants this year. Analysts say Hynix has out-of-date facilities that hold it back from competing with rivals like Samsung.

So for now, Hynix's revitalization waits from the smoke from the United States to clear. With an unprecedented two-day shutdown of air travel into and out of the United States, exporters have been sorely tested.

Hynix says it supplied customers without interruption out of inventory. Slack sales had seen it build a backlog of chips at its U.S. sales offices.

A spokeswoman did not have figures as to how long those would last on Tuesday. But she said Hynix shipments were in any case back to normal.

The U.S. attacks have also hit the months-long talks between General Motors and the Korean government on buying bankrupt Daewoo Motors.

After months of talks, those discussions were still dragging on Tuesday. The latest reports suggest GM is willing to pay just over $1 billion for a slice of Daewoo.

All parties say they want to conclude those talks as quickly as possible. Including a failed attempt to sell Daewoo to Ford, efforts to offload Daewoo have taken more than two years without yet bearing fruit.

Korea's third-largest carmaker failed under its now-$17 billion debt load last November. GM wants its plants to make cars for the nearby Chinese market.