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Creditors cast doubt on Hynix bail-out plan

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Hynix's $5.4 billion debt rescue plan is, like the troubled memory maker itself, in danger of collapse after a creditors' meeting failed to back the company's plan.

Essentially, Hynix wants to borrow a further 500 billion won. It also wants the banks to extend its repayment terms for 2.1 trillion won it has already been lent, and to swap three trillion won of debt for bonds that can be converted into equity at some future date.

Hynix got its creditors to agree to the debt-for-equity plan, according to a Korea Exchange Bank spokesman, cited by Bloomberg. However, that scheme is simply a way of reconfiguring Hynix's existing debt and won't help the company in the short term. Rather more important - if not to say essential - is the creditors' failure to come to a decision on the 500 billion won loan Hynix desperately needs to stay in business.

The signs are not good. KEB president Kim Kyung Lim stressed the importance of the loan in a press conference after the creditors' meeting. "Without the fresh loans, the future of Hynix is uncertain," he said, but added that his fellow creditors will "find it extremely difficult to support Hynix if DRAM prices do not show signs of recovering to $1.50".

In short, the money Hynix needs to dependent on the world DRAM market, and that shows no sign of recovery in the near future.

Certainly other creditors are unwilling to give Hynix any more money. Before the meeting took place, representatives of Korea's Hana Bank and H&CB said they would not agree to extending Hynix's credit. Shinhan Bank and Kookmin Bank yesterday took the same stance.

KEB appears willing to lend Hynix money, as does Hanvit Bank. Hanvit governor Lee Deok-hoon last week said it makes more sense to lend Hynix the money than let it collapse, but the bank this week said it would only agree to extra loan if other creditors would do so too.

New Korean laws mean that Hynix's rescue plan can't go ahead without the agreement of its creditors. And there's clearly not much sign of that happening. ®

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