Back off, Hynix urges US
http://atimes.com/koreas/CI06Dg01.html
SEOUL - Hynix Semiconductor Inc has accused the United States of infringing on South Korea's economic sovereignty in its opposition to its creditors' move to provide a new financial assistance package.
The financially-troubled chip maker has urged the South Korean government to help in resolving its liquidity crisis, saying in a report, "It is in the interests of the national economy that the government steps in to curb the market from sustaining further setbacks, even under a capitalist economy."
The report also said that the government could use its influence in the market in a bid to protect a weak national industry. The report followed a "strongly worded" letter from the US government to Seoul, detailing complaints from Micron Technology concerning the move by Korean creditor banks to arrange a debt-for-equity swap for cash-strapped Hynix. Micron is one of Hynix's main competitors.
Several US senators, who apparently have vested interests in Micron's survival, have reportedly lodged a complaint with the Bush administration, calling for the US government to bring Korea's alleged government subsidies before the World Trade Organization.
With a view to sharpening national competitiveness and laying out a long-term economic strategy, the government should direct the course of restructuring at Hynix and institute measures to facilitate the company's restructuring process, the report said.
Hynix also warned against the adverse effect on the financial markets if the firm goes bankrupt or goes under court receivership. "Korean banks and investment trust firms will be hit by a cluster of non-performing loans totaling 6.5 trillion won [US$5.07 billion] and 1.8 trillion won, respectively, if Hynix goes bankrupt or is placed under court receivership," the report cautioned.
Bankruptcy could also lead to liquidity crises at Hynix's affiliates and subcontractors, the report said. Hynix's exit from the Korean semiconductor sector, in which it and Samsung Electronics Co have a controlling 40 percent share, will leave the sector vulnerable to foreign rivals, the report warned.
On Wednesday, the president of South Korea's Hanvit Bank, Lee Duk-hoon, said that his company would definitely consider offering a fresh loan to Hynix because it thought the firm could be saved.
State-run Hanvit Bank is one of the largest lenders to the cash-strapped chip maker with 980 billion won in credits. In a press conference Lee, however, would not elaborate on the size of the possible financial aid to the world's third largest semiconductor manufacturer.
"For the most part, creditor banks are narrowing differences on a bailout package for Hynix," Lee said. The Hanvit CEO noted that creditors, however, still have differing opinions on details. "The basic policy of creditor banks is not to seek profits in a normal manner but to minimize losses which have already occurred," Lee said.
Lee called on creditor banks to agree to a "cash buy out" measure which would discount the value of loans offered to Hynix by creditor banks that opt out of a new bailout program that offers fresh loans. Lee said that his bank will set aside up to 700 billion won in loan loss reserves after any additional loans to Hynix.
He forecast that Hanvit could garner 3 trillion won in profits by the end of the year, noting that the bank would have over 2 trillion won in profits even after setting aside 700 billion won for loan loss reserves.
Managing director Kim Young-soo of Hanvit Bank said creditor banks will present a fixed schedule of their meetings to settle the Hynix issue on Thursday. "I hope creditor banks consult closely to eventually arrange the bailout package," he said.
Also on Wednesday, the Federation of Korean Trade Unions (FKTU) called for the government and creditor institutions to make a commitment to the survival of Hynix. In a statement on the Hynix problem, the FKTU said that placing the debt-ridden firm under court receivership would undoubtedly cause a crisis and send the economy into a tailspin.
The so-called "big deal" policy engineered by the government to streamline bloated industrial giants' operations is to blame for much of the problem and it is therefore irresponsible of the government not to take a hand in the firm's future now, the union said.
Court receivership would induce the government and creditor institutions to push for restructuring mainly through massive layoffs, thereby forcing innocent workers to shoulder responsibility for the insolvency, the FKTU said. The consequences would be the collapse of the financial market and the loss of countless jobs.
The FKTU said that about 15,000 members of Hynix's union and 150,000 workers from subcontractors have been doing their utmost to help the company stay afloat.
(Asia Pulse/Yonhap)
===== Kevin Dean Buffalo, NY ICQ: 8616001 http://www.yaysoft.com
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