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January 3, 2008 |
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HYNIX SEMICON: S&P Assigns 'BB-' Rating on US$583.4MM Notes Standard & Poor's Ratings Services assigned its 'BB-' rating to Hynix Semiconductor Inc.'s US$583.4 million unsubordinated and unsecured convertible notes maturing in 2012. The ratings on Korea-based Hynix reflect the severe pricing pressures and the cyclical, capital-intensive nature of the commodity DRAM industry, from which the company derives the bulk of its revenues. However, these industry risks are mitigated by the company's strong market share and good cost position in the DRAM industry, as well as its improving market position in the NAND flash industry. Hynix has improved its market position in DRAM to second globally, and NAND flash to third globally, over the past few years, backed by its strong design capabilities and proven process technologies. The company posted strong operating performance through 2006, and its cash position has improved, indicating a recovery in its ability to make needed capital expenditures to maintain its cost-leadership position and service debt through business cycles. At 23%, Hynix had the second-largest market share in the global DRAM industry as of September 2007, following industry leader Samsung Electronics Co. Ltd. (A/Stable/A-1) at 28%. Micron Technology Inc. (BB-/Stable/--), another competitor, has considerably reduced its position in the commodity DRAM market. In China, Hynix had a leading position with about 58% market share as of September 2007, benefiting from the country's booming PC and consumer electronics market. Rising leverage remains a concern, with debt-to-EBITDA reaching 0.9x in 2006 from 0.7x in 2005. Given the company's heavy capital expenditures in 2007 and 2008, free cash flow is likely to be negative over the medium term. However, mitigating factors include Hynix's commitment toward maintaining positive free operating cash flow after 2008 and its efforts to diversify debt maturities through refinancing with longer maturity notes. About Hynix Semiconductor Inc. Headquartered in Echon, South Korea, Hynix Semiconductor Inc -- http://www.hynix.com/ -- is a semiconductor manufacturer. Through a merger with LG Semiconductor in 1999, Hynix Semiconductor now has the world's largest dynamic random access memory chip production capacity as well as the industry's best technical development capacity by fully exploiting synergies resulting from the historical integration of both companies. The company has operations in Russia, and the United States. |
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