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113249
Wed, 03/24/2010 - 12:18
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https://oananews.org//node/113249
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Hynix outlook stable despite weak liquidity: Moody's
By Kim Young-gyo
HONG KONG, March 24 (Yonhap) -- Global credit rating agency Moody's Investors Service said Wednesday it maintains its outlook for Hynix Semiconductor Inc., the world's second-largest DRAM chip maker, at "stable" despite its weak liquidity.
"This is driven by Hynix's strong market position and a more favorable outlook
for average memory prices. Despite its weak liquidity, the stable outlook also
reflects our expectation that the company maintains strong access to the domestic
capital market," said Ken Chan, vice president and senior analyst at Moody???s
Investors Service.
Chan explained the company's liquidity is weak as a result of the prolonged
deterioration of the memory market and the company's reliance on short-term
funding.
"We expect the company to breach its loan covenants in its 2009 financials, but
the rating has incorporated the expectation that Hynix will receive a waiver from
its creditors, the majority of whom are also shareholders," he said.
Creditors of Hynix Semiconductor Inc., most of whom are the Korean banks, said
last week they sold a 6.67 percent stake in the chipmaker through block trade.
The creditors, which bailed out credit-squeezed Hynix by swapping the company's
debts for stocks, now own a combined 21.4 percent stake in the company after the
block sales, with the state-run Korea Finance Corp. holding a 5.5 percent stake
in the company. The deal cut the stake held by former major creditor Korea
Exchange Bank to 4.56 percent.
Mirae Asset Global Investments Co. has become the largest stakeholder with a 6
percent stake in Hynix through trading on the bourse.
The senior analyst at Moody's warned that downward rating pressure could emerge
if the support from creditors starts to weaken following a sale of their stake.
"Any sale by the major shareholders -- the Korean banks -- of their stake in
Hynix remains a concern, as this could signal a weakening in their level of
support to the company," Chan said.
"While the timeline is unknown, evidence of weakening creditor support after a
sale of their stake would be negative for the ratings."
The South Korean chipmaker, however, has a strong market position and is
cost-competitive, generating margins above the industry average, Chan said,
adding that it was one of the first companies to benefit when the memory markets
recovered in the fourth quarter of 2009.
"Hynix is the world's second-largest memory producer, and thus, one of the first
companies to benefit when the market recovers, as it did in the fourth quarter of
last year when the company reported a strong rebound in operating performance,"
he said.
The favorable outlook for memory prices over the next 12 months will improve the
company's cashflow, Moody's expected.
"It still has around 1.6 trillion won of long-term debt coming due this year.
With a projected EBITDA of around 4 trillion won, Hynix still should be able to
cover these loans, as well as capex of 2.3 trillion won, with internal cash,"
Chan said.
He also said the impact of Hynix being in a patent dispute with the U.S. chip
designer Rambus Inc. would be minimal.
Hynix is in the process of appealing to a U.S. higher court over the dispute on
the use of the memory chip technology that Rambus claims to hold the patent to.
"Regardless of the final ruling or any out-of-court settlement, Moody's includes
Hynix's US$397 million provision in the calculation of adjusted debt. The impact
is not material as it represents only 5-7 percent of total adjusted debt," Chan
said.
ygkim@yna.co.kr
(END)
HONG KONG, March 24 (Yonhap) -- Global credit rating agency Moody's Investors Service said Wednesday it maintains its outlook for Hynix Semiconductor Inc., the world's second-largest DRAM chip maker, at "stable" despite its weak liquidity.
"This is driven by Hynix's strong market position and a more favorable outlook
for average memory prices. Despite its weak liquidity, the stable outlook also
reflects our expectation that the company maintains strong access to the domestic
capital market," said Ken Chan, vice president and senior analyst at Moody???s
Investors Service.
Chan explained the company's liquidity is weak as a result of the prolonged
deterioration of the memory market and the company's reliance on short-term
funding.
"We expect the company to breach its loan covenants in its 2009 financials, but
the rating has incorporated the expectation that Hynix will receive a waiver from
its creditors, the majority of whom are also shareholders," he said.
Creditors of Hynix Semiconductor Inc., most of whom are the Korean banks, said
last week they sold a 6.67 percent stake in the chipmaker through block trade.
The creditors, which bailed out credit-squeezed Hynix by swapping the company's
debts for stocks, now own a combined 21.4 percent stake in the company after the
block sales, with the state-run Korea Finance Corp. holding a 5.5 percent stake
in the company. The deal cut the stake held by former major creditor Korea
Exchange Bank to 4.56 percent.
Mirae Asset Global Investments Co. has become the largest stakeholder with a 6
percent stake in Hynix through trading on the bourse.
The senior analyst at Moody's warned that downward rating pressure could emerge
if the support from creditors starts to weaken following a sale of their stake.
"Any sale by the major shareholders -- the Korean banks -- of their stake in
Hynix remains a concern, as this could signal a weakening in their level of
support to the company," Chan said.
"While the timeline is unknown, evidence of weakening creditor support after a
sale of their stake would be negative for the ratings."
The South Korean chipmaker, however, has a strong market position and is
cost-competitive, generating margins above the industry average, Chan said,
adding that it was one of the first companies to benefit when the memory markets
recovered in the fourth quarter of 2009.
"Hynix is the world's second-largest memory producer, and thus, one of the first
companies to benefit when the market recovers, as it did in the fourth quarter of
last year when the company reported a strong rebound in operating performance,"
he said.
The favorable outlook for memory prices over the next 12 months will improve the
company's cashflow, Moody's expected.
"It still has around 1.6 trillion won of long-term debt coming due this year.
With a projected EBITDA of around 4 trillion won, Hynix still should be able to
cover these loans, as well as capex of 2.3 trillion won, with internal cash,"
Chan said.
He also said the impact of Hynix being in a patent dispute with the U.S. chip
designer Rambus Inc. would be minimal.
Hynix is in the process of appealing to a U.S. higher court over the dispute on
the use of the memory chip technology that Rambus claims to hold the patent to.
"Regardless of the final ruling or any out-of-court settlement, Moody's includes
Hynix's US$397 million provision in the calculation of adjusted debt. The impact
is not material as it represents only 5-7 percent of total adjusted debt," Chan
said.
ygkim@yna.co.kr
(END)
