[EDITORIALS]Coddling Hynix Won't End ProblemCreditors of Hynix Semiconductor Inc. finally decided to bail out the debt-ridden chipmaker after extended negotiations. However, it is too early to say whether one of the most serious problems in Korea's economy has been resolved or simply put off. Although the creditors are hoping the newest bailout plan will be the final measure to support the troubled chipmaker, their position is uncertain and the future of the semiconductor industry is gloomy.
Under the bailout plan, creditors will convert 3.1 trillion won ($2.4 billion) of Hynix's outstanding debt into bonds convertible to equity stakes and provide 650 billion won of new loans. The latest proposal is extremely unusual because some of the 14 creditor banks decided to write off a significant amount of debt.
Their action raises questions. First, why did the creditors take such a long time to draw up the bailout plan? Creditors reached a general agreement on the debt-equity swap and the amount of new loans in August. The effectiveness of new loans shrinks if they are ill-timed. Since the decision to provide new loans was delayed, the credibility of Hynix in domestic and overseas markets has been damaged even further.
The problems associated with supporting Hynix have not been resolved completely despite the recent bailout proposals. We should wait and see if the banks, which agreed to provide new loans, will actually keep their promises; it is also possible that foreign rivals of Hynix could raise further complaints. Foreign chipmakers, including Micron and Infineon, are eager to file a case against Korea's semiconductor industry to the World Trade Organization. In a few days, American banks will decide whether to declare Hynix's U.S. corporation in default.
Although domestic creditors believe that such a decision is unlikely, the bailout plan would have to be revised again if foreign banks announced Hynix in default.
Creditors' duress associated with Hynix has been exacerbated to carry out the recent debt-restructuring proposal. Korea Exchange Bank and Hanvit Bank will end up lending a total of more than 1 trillion won to Hynix. If the chipmaker is put under receivership, the banks will suffer from deep financial burdens. And if the banks have chosen to save Hynix only to avoid their own crisis, they may have created another serious problem. How can we expect domestic banks to be competitive under such circumstances?
We understand the banks agonized over the decision because the future of the semiconductor industry is uncertain and the decline in the industry is directly related to the stagnation of our economy. The creditors have embarked on a dubious undertaking under unpredictable conditions.
Hynix no longer has close allies. Samsung Electronics recently took aggressive steps to combat the global semiconductor slump by producing the 300-millimeter wafer. Overseas chipmakers, including Hitachi Ltd. of Japan, recently considered filing anti-dumping suits against Korean products.
Unless Hynix puts every effort into rescuing itself and manages its business with the top priority on profits, the company will not recover. Instead of repeating that "this bailout will be the final one," creditors should closely scrutinize the chipmaker. Creditors should also demonstrate a resolute attitude by withdrawing its support immediately if Hynix fails to carry out a self-rescue program or market conditions erode further. That is the duty of the creditors - and it would be a good lesson for Hynix's management.