Hynix creditors closer on Micron deal

But the sides are still haggling about certain loan terms surrounding the $4 billion deal that would create the world's biggest computer memory maker.

Aug. 16, 2002 2:42 a.m. PT

2 min read

Creditors of South Korea's Hynix Semiconductor said Monday that they are closer to selling core assets to U.S.-based Micron Technology in a $4 billion deal that would create the world's biggest computer memory maker.

But the sides were still haggling about the terms of loans South Korean banks would give Micron and contingencies for future bad debts at the company, whose creditors twice last year provided multibillion-dollar bailouts, its main creditor said.

"We still have a long way to go and the chances of signing a memorandum of understanding are still 50-50," a Korea Exchange Bank official said.

Hynix creditors are set to meet this week to decide whether to sign a memorandum of understanding that would catapult Micron over Samsung Electronics as the world's biggest memory maker.

At talks last week in the United States, negotiators cleared several hurdles, agreeing to a $4 billion price tag for the deal, extending a loan to Micron after the takeover and setting the level of Micron's investment in Hynix's non-memory unit.

"We agreed on the sale price and secured Micron's pledge to invest in what remains of Hynix," the official said.

But the two sides had yet to resolve the question of future bad debt and the terms of fresh loans to Micron, he said. Hynix, which owes more than $6 billion to creditors, has been in talks with Micron since December on a deal to sell its core memory chipmaking operations.

Memory chips are used in computers, and non-memory chips, Hynix's smaller sideline, are used in most electronic gadgets.

Hynix Chief Executive Park Chong-sup and creditors returned to Seoul, South Korea, over the weekend after a week of negotiations with Micron in Northern California.

Park was not immediately available for comment.

Media reports indicated that Micron had insisted on putting 25 percent of its shares, which will be used to buy Hynix's memory operations, in an escrow account and taking them back if additional losses are found after the takeover. Creditors want the percentage reduced to around 10 percent, newspapers said.

Micron declined comment, beyond saying the talks continue.

A source close to the deal said last week that Micron would buy Hynix's memory operations for $3.8 billion with its own stocks and invest the remaining $200 million with cash into the rest of Hynix.

Last year's record fall in memory chip prices triggered Hynix's woes and an industrywide consolidation to stem losses.

But they are staging a rebound from lows below $1 in November on expectations for reduced supply after consolidation and hopes for a recovery in the information technology sector.

Spot prices for industry standard 128-megabit DRAM (dynamic random access memory) chips were trading at around $4 Monday, according to DRAMexchange.com.