SK Hynix to issue $2.5 bn worth of global bonds; largest amount ever

SK Hynix Inc. is planning to issue $2.5 billion worth of global bonds, the largest amount to be raised in a bond issue by a South Korean company, driven by overwhelming demand from investors who have flocked to the company for its solid performance as a leading chipmaker.

The Korean company received $12.3 billion worth of orders in the bookbuilding for overseas investors on Wednesday, almost fivefold the planned amount, according to investment banking sources on Jan. 14. 

The global bonds will be issued with lower interest rates than expected. Three-year bonds will be issued with an annual 1.06% interest rate, five-year bonds with an annual 1.52% interest rate, and 10-year bonds with an annual 2.49% interest rate. Global credit rating agency Moody’s has given SK Hynix a Baa2 rating, while Standard & Poor's gave the company a BBB0 rating.

The dollar-denominated bonds will be issued simultaneously across key financial markets, including the US, Europe and Asia. Underwriters include Bank of America, Citigroup Global Markets Korea Securities, Credit Agricole, Credit Suisse, BNP Paribas, HSBC and JP Morgan.

The company plans to use the proceeds to invest in facilities alongside repaying loans. The amount of SK Hynix's global bond issue beats the previous record of LG Chem Ltd.'s $1.6 billion bond sale in 2019.

The explosive demand for SK Hynix's bond sale affirms overseas investors’ full confidence in the Korean chipmaker, which posted satisfying earnings last year with a combined operating profit of around 4.5 trillion won ($4.1 billion) in the first three quarters, up by 63.3% from the previous year, despite the stagnant economy due to the COVID-19 crisis.

The company’s $9 billion acquisition of Intel Corp.'s NAND memory chip business is another major factor grabbing investor attention. Last October, SK Hynix announced its plans to acquire Intel’s NAND business in an all-cash deal. Once the deal is completed, SK Hynix is expected to become the world’s second-largest player in the NAND market, as it already is in the DRAM market.

INVESTORS EYE OPPORTUNITY

Industry watchers expect the semiconductor industry to enter a boom cycle this year, propelled by growing demand from core industries that produce IT devices, servers and electric vehicles.

Domestic securities firms project SK Hynix to post an operating profit of around 9.3 trillion won ($8.4 billion) this year, up by 88.2% from last year.

Many financial investors at home and abroad have reached out to SK Hynix to participate in financing for the Intel NAND flash business acquisition, the biggest deal ever by a Korean company.

SK Hynix needs to pay $7 billion to Intel this year and the remaining $2 billion by March 2025. Some financial investors are hoping to take part in the financing, but the company is focused on raising funds internally via bond issues, given that it will be able to cover almost half of this year's payment through the bond sale proceeds alongside its current cash holdings and loans, according to the M&A industry.

“Currently, there's nothing confirmed about financial investors, although it is considered as an option. There's a higher chance that the company will carry out additional bond issues,” said a financial industry official, explaining that there is some breathing room as the acquisition payments to Intel will be carried out in phases.

SK Hynix is open to potential partnerships if a financial investor offers favorable terms. However, the company is likely to take a careful approach, given that securing external money may complicate its relationship with shareholders.

Other financing options include utilizing investment stakes held by SK Hynix. In 2018, the Korean chipmaker invested about 4 trillion won in Japanese chipmaker Kioxia Holdings Corp. through a consortium led by US private equity firm Bain Capital. SK Hynix will pocket some returns if Kioxia makes a successful trading debut.


Write to Jin-sung Kim and Ri-ah Kim at jskim1028@hankyung.com
Danbee Lee edited this article.