SK Hynix to issue $500 mn in dollar bonds to brace for protracted slowdown

South Korea’s SK Hynix Inc. plans to raise $500 million by issuing dollar-denominated bonds in October to gird itself for a protracted industry slowdown in the wake of the COVID-19 pandemic.

According to the investment banking industry on August 31, the world’s No. 2 memory chipmaker has begun the sale process, having chosen unidentified foreign securities companies as lead managers for the bond issue.

SK Hynix may increase the size of dollar bonds if demand significantly exceeds supply during the bookbuilding, sources said. The company is issuing the bonds to secure operating funds needed for next year.

The overseas dollar bond issue comes as SK Hynix and other rivals such as Samsung Electronics are bracing for worsening business conditions amid falling chip prices following the resurgence of the coronavirus.

 



SK Hynix already secured 1.6 trillion won in capital by issuing corporate bonds in February, the largest such issue among Korean companies this year, to repay debt maturing by the end of 2020. Industry officials say the company is hoarding cash before the debt market turns tight as foreign investors are concerned about the slowing Korean economy.

As worries about the economic impact of the coronavirus pandemic deepen, the Bank of Korea last week lowered its 2020 growth forecast for South Korea to a negative 1.3% from the previous 0.2% contraction, citing weaker exports and easing private consumption.

International bodies such as the Organization for Economic Cooperation and Development and the International Monetary Funds also predict Asia’s fourth-largest economy to contract this year, for the third time in its history.

SK HYNIX TO FOLLOW ON SUCCESS OF OTHER BOND ISSUES

Analysts say SK Hynix will have no problem raising $500 million through the planned dollar bond issue in October, given its industry standing and global recognition.

SK Hynix successfully secured $500 million from foreign bond investors in 2019, when the chip industry was reeling from low demand. It was required to dramatically raise the bond issue from the original $300 million given overwhelming $3.5 billion won demand during the bookbuilding process.

The chipmaker’s decent business performance this year also boosts its chances for a successful bond sale.

SK Hynix posted an operating profit of 1.95 trillion won ($1.63 billion) for the quarter ended June, its highest quarterly earnings since the fourth quarter of 2018. Revenue totaled 8.61 trillion won, up 33.4% year on year. For the first six months, its operating profit rose 37% on the year to 2.75 trillion won.

Recently, a number of Korean companies, including KT Corp., Doosan Infracore, GS Caltex and Mirae Asset Daewoo, have been successful in issuing foreign currency bonds, reflecting firm appetite among overseas investors for Korean debt.

Write to Jin-sung Kim at jskim1028@hankyung.com