SK hynix issues $1.7 bil. exchangeable bond to fund operations

The Korea Times

The Korea Times

Business

Mon, October 2, 2023 | 13:17

Tech

SK hynix issues $1.7 bil. exchangeable bond to fund operations

Posted : 2023-04-04 16:39

Updated : 2023-04-05 10:56

SK hynix's plant in Icheon, Gyeonggi Province / Courtesy of SK hynix

By Baek Byung-yeul

SK hynix, the world's second-largest memory chip producer, has issued exchangeable bonds to secure $1.7 billion in liquidity for the operation of its semiconductor-manufacturing business which has experienced difficulties due to sluggish chip demand, the memory chip maker said Tuesday.

In a regulatory filing to the Financial Supervisory Service, SK hynix said it will issue $1.7 billion in overseas exchangeable bonds to secure operating funds.

Exchangeable bonds are bonds that include the right for investors to exchange them for shares of another company held by the issuing company after a certain period of time.

The bonds will be exchangeable for 20,126,911 shares held by SK hynix, which accounts for 2.8 percent of the total issued shares. The maturity date for the bonds is April 2030.

The industry view was that SK hynix would secure liquidity through capital increases by issuing new shares to smoothen the operation of its business that has faced a steep downturn. But the company opted for the issuance of exchangeable bonds, which can be interpreted as a move to avoid dilution of equity value.

On the announcement of issuing convertible bonds, however, investors responded negatively as the shares of SK hynix decreased by 3.1 percent to end at 84,500 won on the KOSPI stock market, Tuesday.

Currently, the chip industry is experiencing an ordeal due to increased inventories of their customers and falling chip prices. Reflecting the situation, Moody's Investors Service recently changed the company's outlook from stable to negative.

"The global memory chip industry is undergoing a severe downturn amid a large supply glut caused by a sudden downshift in technology product demand and slowing macro conditions. As a result, Moody's expects SK hynix's adjusted EBITDA to fall steeply to about 5 trillion won in 2023 from 21 trillion won in 2022," Moody's said.

However, the credit ratings agency added that it expects the company to "stem further debt growth by substantially cutting capital spending and clearing excess inventories this year. Once the industry turns around, the company will likely focus on generating free cash flow and reducing debt."

baekby@koreatimes.co.kr