"Hynix, Business Normalization in 2006 "

Experts officially announced, “If Hynix takes an intensive corporate restructuring and pays its debts, it will be able to normalize the business from 2006.”

However, before the debts adjustment of creditors, it must execute the capital reduction of 20∼30:1 through consolidation of stocks for existing stocks of Hynix. It means that 20 securities of Hynix’ stock are changed into 1 security of stock.

Deutsche Bank presented the corporate restructuring proposal of Hynix including the above method to the meeting of all creditors on November 26.

When the debts adjustment proposal is accepted based on the report, creditors plans to make MOU (Memorandum of Understanding) for the business normalization plan of Hynix with Hynix.

The debts adjustment would be agreed by investment trust companies which have debentures of KRW 1,400 billion. Because the investment trust institutes settled 50% of Hynix’s debentures as a loss, creditors are ready to accept the debt adjustment proposal of Deutsche Bank. However, a final decision hasn’t been made yet.

If debts are adjusted through debt-equity swap of unsecured loan (KRW 1900 billion) and maturity expansion of liabilities (KRW 3 trillion), Hynix can reduce the interest burden of KRW 240 billion per year. Deutsche Bank proposed to take KRW 1.1 trillion by selling the non-core assets such as marketable securities and real properties and to dispose of the non-memory business (System IC) actively. It recommended the sale of the memory business considering the change of semiconductor market conditions.

Lee Kang-Won, president of Korea Exchange Bank (KEB) said, “If the corporate restructuring and self-plan is executed smoothly, Hynix is likely to repay the debts and normalize the business in 2006. It is different from an independent survival, but is based on a basic principle in increasing the company value and finding a new owner.” If the corporate restructuring proposal is accepted, Hynix will be able to have a good backing to survive in a severe competition of the industry. Also, it will be able to participate in a keen technical competition by obtaining strength of additional facility investment. However, the semiconductor industry is showing a downward tendency in the world IT industry and so a possibility on the future survival of Hynix cannot be expected. The allowance related lawsuits of EU and US are a big assignment of Hynix.

Joong-Hyun Park Do-Young Kim sanjuck@donga.com nirvana1@donga.com