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Hynix bail-out plan sets Micron a-grumbling

Mutter... state intervention... grumble... unfair competition... muttter... last man standing...

Micron Technology is apparently rather narked about the level of help rival memory maker Hynix is getting at the moment - and has demanded that the US government investigate the matter.

As issue is a key aspect of Hynix's debt recovery programme: a debt-for-equity deal valued at $2.32 billion. Under the terms of the plan, agreed by Hynix's creditors last week, they will convert three trillion won of debt into bonds which they can exchange for Hynix stock at some future date.

The bonds have an initial exchange price of 3100 won and could allow the banks to hold up to 966 million Hynix shares, provided Hynix is able to issue a further $770 million worth of new stock for public issue - a second strand to the current recovery plan.

Micron's objection to the first part of the plan is that since Hynix's creditors are all owned by the South Korean government, at least in part, the bail-out plan amounts to state intervention. And that is contrary to the terms of a 1997 IMF bail-out programme for Korea itself.

Essentially, Micron is saying that Hynix is being given an unfair advantage by not being allowed to collapse. A company spokesman damned the latest bail-out plan as financially unsound, an EBN report says.

Micron would, of course, like nothing more than to see Hynix collapse. From its stance on the Hynix rescue package and its previously stated goal to be the "last man standing" when the tornado of recession has swept through the memory market - a bit like Tornado Nari earlier this week, in fact - the company clearly has a 'survival of the fittest' attitude to business.

Indeed, Taiwanese memory makers last week met to discuss possible responses to the threat of legal action launched against them by Micron. They believe that the company might accuse them of dumping product in the US by selling it below cost price. The threat of such action seems to have receded slightly, not least because, in the current market conditions, everyone is selling certain types of memory below cost.

According to the EBN piece, Micron has been pushing the US Treasury Department to make an official complaint to the World Trade Organisation about the bail-out plan if the debt-for-equity scheme was put in place. With last week's creditors agreement, the Department will now file its complaint, Micron says. The Department has confirmed it has been talking to Micron.

Separately, one of EBN's European industry sources said the EU is also thinking about complaining to the WTO about the Hynix bailout. ®

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