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Korea: How Hynix emerged from the perfect storm

The financial rehabilitation of Korean chipmaker Hynix offers salutary lessons for the region. Once the company was an embarrassment that an entire country wanted to go away. Now its creditors will reap a bonanza from a deal that they never even wanted. Chris Leahy reports from Seoul.

IN OCTOBER 2005, Hynix Semiconductor launched a $1.9 billion sale of shares, part of the stake held by its creditors acquired after the completion of what is arguably Asia’s most successful debt restructuring.

The stake, 23.4% of Hynix’s shares, was launched at a price of W19,300 ($18.43) a share. That compares with an estimated average acquisition price by creditors of about W12,000 a share. Creditors have already recovered nearly half of their total exposure to the Korean chipmaker. More significantly, the banks still hold 50.3% of the company. Based on the current share price of about W35,000 (see price graph) they are set for windfall profits as and when that stake is monetized. Credit Suisse recently issued a target price of W45,000. At the very least, the banks’ exposure is more than twice covered by the collateral held.

Hynix’s restructuring has been so successful that it is becoming a benchmark for similar deals in the region. Inevitable comparisons are being made with Asia’s largest and arguably least successful restructuring, that of Indonesia’s Asia Pulp and Paper. Although similar in size and nature, the Hynix and APP deals could not be more different in outcome [see Same start, different outcome, this issue].

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