Hynix creditors resume hunt for buyers

Hynix Semiconductor creditors plan to approach investors this month to sell a stake in the South Korean chipmaker and could offer loans to potential bidders after three previous attempts to find a strategic buyer failed.

Creditors rescued Hynix after it almost collapsed in 2001 under the weight of its debts. However, they have since struggled to find a local strategic buyer for Hynix, having excluded foreigners from the auction because of worries about sensitive technology information leaking outside of the country.

State-run Korea Finance, the chipmaker’s largest shareholder with a 5.5 per cent stake, said creditors aimed to sell their 20 per cent holdings, worth about Won3,120bn ($2.5bn) by current market value, by the end of this year.

Korea Finance said that to help overcome financing concerns, creditors would offer a credit line to a buyer to reduce their investment burden.

Creditors are eager to sell their remaining stake to recoup an original investment worth $4.6bn, as Hynix shares have gained 15 per cent this year after more than tripling in 2009 on rising chip prices.

Creditors have had tried three times in the past year to sell their stake in Hynix, the world’s second-largest memory chipmaker. But concerns about the huge investments required after acquiring the company are believed to have deterred potential buyers.

The only company to have shown firm interest in buying Hynix was Hyosung, a mid-sized Korean conglomerate focused on fibre and chemicals. However, Hyosung dropped its bid for Hynix last year because of financing problems.

In March the creditor group offloaded a 6.7 per cent stake in Hynix for Won923.2bn through a block sale.

Creditors have said that if they cannot find a buyer for the rest of their stake by the end of this year, they plan to sell it to a private equity fund or in the market.

Hynix recently announced a plan to raise its capital expenditure by a third to Won3,050bn this year to take advantage of a strong recovery in the global technology sector. It came after industry leader Samsung Electronics doubled its investment in semiconductors to Won11,000bn in an effort to cement its technology lead over rivals.

Separately, creditors are also looking to begin the sale this month of a stake in Hyundai Engineering & Construction, South Korea’s biggest builder. The Korea Finance-led group – which holds a controlling 38.6 per cent stake – aims to select a preferred bidder by as early as September.

Creditors took over Hyundai Engineering & Construction in the wake of the Asian financial crisis at the end of the 1990s. Korea Finance is the builder’s largest shareholder with an 11.2 per cent stake.

Shares in Hyundai Engineering have fallen more than 20 per cent so far this year due to the slump in the local construction industry.