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Hynix creditors meet to break bailout deadlock

Will it clear the way for chip company's rescue?

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Hynix's creditors will meet today to decide whether they should support the ailing, debt-laden memory maker's $6 billion rescue programme.

Some creditors feel it's too soon to pull the plug on the company, others that they have lent it enough money already. Today's vote will centre on a plan to allow some creditors to back out of the rescue plan unilaterally.

If the move wins the approval of creditors, some of their number will be allowed to swap debt for equity based on Hynix's liquidation value. Arguments over whether Hynix should be extended further credit and by how much have largely hindered the chip company from initiating its recovery plan. An agreement to swap a four trillion won portion of the company's current debt for Hynix shares was broadly reached a month or so back.

The plan is as political as it is pragmatic since it will give those creditors who remain an even greater share of Hynix's debt, in turn allowing them to exercise greater control over how the company's recovery plan is managed. Under Korean law, if creditors who hold 75 per cent or more of a company's debt come together, their agreement can be imposed on other creditors.

So if the majority decide to continue pumping money into Hynix, the rest will have to follow suit - whether they like or not.

However, creditors who choose to opt out now may not receive as much money as they would by maintaining their ongoing support for the chip maker. They do have another option: to sell their debt to the other creditors. ®

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