Fears of block sale hit Hynix

Shares in Hynix Semiconductor, the South Korean chipmaker, fell on Tuesday after Korea Exchange Bank admitted creditors might be forced to divest part of their stake in a block sale on the stock market.

The move comes after Hyosung, the fibre and chemicals conglomerate, last week withdrew its offer for the combined 28 per cent stake, worth about $3bn, owned by creditors.

Hyosung was the only company to make an offer out of the 40 or so groups invited to bid.

“There is a common understanding among creditors of the need to sell shares either by reopening bids or selling part of the stake in the capital markets,” said KEB, Hynix’s main creditor.

Creditors plan to start the procedure for another auction this month but will push for a block sale if no buyer appears. They will meet on November 25 to decide details of the sale plan. Credit Suisse, Korea Development Bank and Woori Investment & Securities are advising creditors on the sale.

The news pushed Hynix shares almost 7 per cent lower to Won18,400, the biggest decline in almost two months, as the wider market closed 0.4 per cent lower.

Creditors rescued Hynix after it almost collapsed in 2001 under the weight of its debts. Spurred on by the company’s recent turnround and a brighter outlook for the chip sector as a whole, creditors have been anxious to sell to recoup their original investment.

Hynix returned to net profit in the third quarter after two years of losses as industry-wide production cuts boosted chip prices.

Standard & Poor’s recently raised its outlook on Hynix’s long-term corporate credit rating from negative to stable, citing the chip market’s recovery and the company’s profitability.

But analysts still expect Hynix to be a “hard sell,” given the heavy investment requirements after acquiring the company coupled with the high price tag and the industry’s cyclical nature.

Creditors want to sell Hynix to a domestic buyer because of its strategic importance but analysts say it will be difficult to draw interest at a time when other Korean assets are hitting the market.

State-run Korea Development Bank plans to restart the sale of Daewoo Shipbuilding & Marine Engineering soon, as the government speeds up the sale of state assets to fund its stimulus package to boost the economy.

Other companies on the sales block include Daewoo International and Daewoo Engineering and Construction.

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