It is tempting to draw comparisons between the restructuring of Hynix Semiconductor of Korea and Indonesia’s Asia Pulp and Paper if only because of the vastly different outcomes for creditors. Hynix started its $12 billion restructuring in 2001 and emerged successfully in 2005 with full recovery likely for all creditors; APP began efforts to restructure its $14 billion of debt the same year, yet the creditors and management remain at loggerheads.
The similarities do not end there, however, as Robert Fallon, chairman of Korea Exchange Bank (KEB) and Hynix’s lead creditor during the restructuring, points out. “Hynix’s problem was never one of technology or cost structure,” he says. “It was simply too much debt. That’s very similar to APP: they took on a great deal of debt to fund a reckless expansion programme without a commensurate increase in sales to take up their excess capacity. They still made good paper; they just had too much debt.”
There are two key differences between the deals that explain their vastly different outcomes, as Anthony Steains, former head of M&A at Deutsche Bank, Hynix’s financial adviser, explains. “With Hynix, you didn’t have a controlling family shareholder,” he says, “and you had a legal framework in place that was respected by all creditors.