November 19, 2009 – With the pullout of proposed investor Hyosung Corp. (citing "groundless rumors," including possible government favor), creditors of Hynix Semiconductor are looking to push ahead with a sale, even if a public sale doesn’t work out, according to local reports.

The state-owned Korea Exchange Bank (KEB), representing other Hynix shareholders, had lined up smaller domestic conglomerate Hyosung (which has no background in memory chips) to take a ~28% stake worth about $3B. But last week Hyosung said in a filing with the Korea Exchange that the process had become impossible to achieve given "baseless criticism" about favoritism toward it — fueled by creditors’ willingness to unexpectedly extend the bidding deadline, and their willingness to only part with part of their ownership stakes.

The fallout of Hyosung’s departure likely means Hynix’s creditors will likely try to sell down their shares in smaller chunks, "perhaps by 6-7 percentage points, through next year while the sale process goes on," said Lee Min-hee, an analyst at Dongbu Securities, quoted by Reuters. Having a domestic owner — perhaps even publicly owned, like steelmaker POSCO — also is seen as a favored outcome.

And now reports are surfacing that Hynix creditors may indeed try to get rid of their stakes piecemeal by pursuing a "block deal" — i.e., selling shares to major investors on the market — if the public sale option doesn’t materialize, in order to take advantage of the more favorable conditions as the memory market gains steam. A decision is due by late November; open bids would be held if three-quarters of shareholders support the measure, and letters of intent from buyers would be accepted by Dec. 15. If no buyer materializes, creditors would likely seek to unload stakes in bigger chunks than originally planned, noted officials cited by Reuters.

A block sale would not necessarily solve things, though. "If a block deal becomes a reality, a possible overhang issue will likely weigh on Hynix shares for a while," said Kim Hyun-joong, analyst at Tong Yang Securities, quoted by Dow Jones. And several reports local and international noted that if no deal is achieved relatively soon, it may get tougher to attract potential investors — the KEB has plans to sell several state assets over the next couple of years.