Press Release

Statement from hynix Semiconductor for current issue.

By August 27, 2001 December 7th, 2020 No Comments

Seoul, Korea, August 27, 2001

The position of hynix Semiconductor Inc. on Societe Generale’s request of prepayment is as follows:  Societe Generale, Seoul Branch (“SG”), in its capacity as agent under the US$ 150 million loan agreement dated May 30, 1996 (the “Loan Agreement”) between hynix and a syndicate of lenders including SG, has recently requested hynix to prepay the outstanding principal amount of the loan (approximately US$ 46 million), together with all accrued interest and other amounts due thereunder.

As the basis for its request, SG cites the recent disaffiliation of hynix from the Hyundai Group, claiming that this constitutes a breach of covenant under the Loan Agreement. The covenant in question requires the Hyundai Group to remain the “largest and controlling shareholder” of hynix.  SG has expressed an intention to proceed with measures available to it under the Loan Agreement, including potentially a declaration of an event of default, unless we comply with its request to prepay the Loan.

There is no basis for SG’s claim that disaffiliation of hynix involved any change of control giving rise to a breach under the Loan Agreement for the following reasons:

1. The disaffiliation in no way affected any issue of “control” of hynix. Shareholdings of the Hyundai-related shareholders have not changed, and the disaffiliation had no effect on any shareholder relationship between hynix and the Hyundai Group.
2. Since prior to disaffiliation, a majority of hynix’s board of directors (7 out of 10 incumbent directors) has been occupied by independent directors not affiliated with hynix or the Hyundai Group. The remaining 3 seats are filled by senior executives of hynix. As this composition has been in place since last year, and the Hyundai Group has exercised no influence on the direction of hynix’s management, hynix has therefore operated for some time as a company completely independent of the Hyundai Group.

We have repeatedly urged SG to reconsider their request for prepayment. It is our considered view that the covenant cited does not represent any genuine issue, and rather the alleged breach of it is a pretext by which SG, due to concerns with the situation of our company at present, is attempting to obtain payment of their loans in priority to our other creditors. 

We believe it is our legal and ethical duty to act in good faith, and in an equitable manner, so as to preserve a fair relationship with all our creditors, without favoring any one group of our creditors. 

To be clear, no event of default has been called by SG. hynix is in continued discussions with its creditors.

In view of the foregoing, and after thorough consideration, we have concluded the following:

1. There is no basis for SG’s allegation of a breach of covenant.
2. Acquiescence to SG’s request for prepayment would inevitably result in inequitable treatment among our creditors, to the detriment of all concerned.