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Hynix Q3 loss balloons to $1.3 billion

How long will its creditors hang on in there?

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Much-troubled memory maker Hynix had more bad news for its creditors and investors this morning: its Q3 loss totalled 1.6 trillion won ($1.3 billion) - larger than the company had forecast and well below the 66 million won profit it made this time last year.

In the year-ago quarter, Hynix recorded sales of 2.4 trillion won. This time round, quarterly sales fell to 552 billion won, a fall of 77 per cent.

Hynix has been hit very hard by the collapse in the global memory market. According to market research organisation Gartner, the DRAM business will contract 67 per cent this year. And 2002 won't see any improvement: Gartner reckons the market will shrink a further 19 per cent next year.

Which means Hynix can't expect the market to help it out of its predicament. That leaves it relying even more closely on its creditors. In the light of today's results, they may withdraw their favour.

Hynix is currently asking its creditors for effectively seven trillion won through a mix of further loads, debt reduction schemes and repayment extensions. Creditors have given the memory maker more time to pay off its debts and have agreed to its debt-for-equity plan, but they seem increasingly unlikely to offer it more money.

The level of the biggest creditors' exposure to Hynix suggests they're unlikely to be willing to let it go, but Gartner's gloomy - nay dire - prognosis for the memory market for the next 12 months and more may persuade them that Hynix hasn't a hope of ever paying them back. As it matters now stand, the current bailout plan, even if accepted in full by Hynix's creditors, may prove insufficient to keep the company afloat.

Selling off older production facilities may not help much either. But without the cash, Hynix can't invest in next-generation plant, leaving it behind its competitors when the market does, eventually rebound. ®

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