Hynix Semi creditors to sell $2bn in shares

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Creditors of Hynix Semiconductor plan to sell 40m to 62m Hynix shares worth Won1,200bn to Won1,900bn next month, in a continuing effort to recoup the cash they injected into the world?s second largest memory chipmaker when they rescued it from bankruptcy.

Besides the creditor sale of existing shares, which will be carried out via an offer of global depository receipts or a block trade, the South Korean chipmaker also plans to sell new shares to raise $700m, as it tries to make up for years of under-investment through aggressive capital expenditure.

The twin moves, announced by main creditor Korea Exchange Bank on Wednesday, pushed Hynix shares 2.86 per cent lower to Won30,600 amid concerns over a stock overhang.

The planned sale by creditors of a 9-14 per cent stake had been expected for months. The share price has surged 56 per cent since last October, when creditors sold about a third of their initial 73.8 per cent stake.

Creditor banks saved Hynix from bankruptcy with a bailout worth $4.6bn in 2001-02. The upcoming stock sale will reduce their stake to as low as 35 per cent from 50 per cent, but analysts expect them to continue to have some influence over the chipmaker?s management.

Hynix completed its debt-workout programme last July, and posted a record profit of Won1,700bn last year, after tough restructuring and a recovery in the volatile chip market.

After years of paying down debt rather than investing in production, Hynix is now focusing on building production facilities to boost competitiveness. Capital expenditure of Won3,600bn is planned for 2006, including Won1,300bn for its Chinese plant.

Korea Exchange Bank said Hynix?s new shares will be offered as GDRs or convertible bonds in overseas markets. Creditors plan to formally approve the sale next week and will conduct a roadshow in late June or early July. Seven lead-managers including Merrill Lynch were selected last month for the stock sale.

Hynix saw an 8.6 per cent fall in first-quarter profit due to steep price declines of flash memory chips used in mobile digital electronics devices. But analysts expect a rebound in the second half, as the chip market makes a seasonal recovery.

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