SK hynix raises $1.7bln in convertible bond as chip slump deepens

South Korea’s SK Hynix has raised $1.7 billion in its first convertible bond sale in a decade, as the world’s second-largest memory chipmaker braces for deepening quarterly losses, hit by a sharp downturn in global semiconductor demand.

The financing, the first such deal by the firm since it was acquired by energy to telecoms conglomerate SK Group in 2012, follows a rare $15.2 billion financing deal by cash-rich Samsung Electronics in February.

SK Hynix said in a regulatory filing on Tuesday that the proceeds of the bond sale would be used to fund operations such as buying chip production materials. The bond is convertible into shares amounting to 20.1 million, or a 2.8% stake.

“This financing is expected to end market concerns about a short-term liquidity crunch,” Kim Kwang-jin, an analyst at Hanwha Investment & Securities, wrote in a note.

Shares in SK Hynix dropped as much as 4% before paring its loss to 2.5%, versus a 0.4% gain in the broader market (.KS11).

The fundraising comes after SK Hynix posted a record quarterly operating loss of 1.7 trillion won ($1.4 billion) in the September-December quarter.

Analysts forecast a much worse loss in the quarter ended March 31 before an expected memory chip industry rebound in the second half of the year.

The bonds, to be listed in Singapore, have a coupon of 1.75% a year and will mature in 2030, according to a term sheet seen by Reuters.

SK Hynix’s deal was the largest convertible bond in the Asia-Pacific region, excluding Japan, in a year, according to Refinitiv data.

The company originally planned to raise up to $1.5 billion but the size was increased to $1.7 billion while the bookbuild was underway because of high demand, according to a person familiar with the matter who was not authorised to speak publicly.

Demand for the bonds was four times the amount on sale and investor appetite was not dented by recent global financial market volatility, the person added.

“We successfully issued bonds due to high demand, and many investors are believed to have put weight on the company’s growth potential, despite difficult business conditions,” SK Hynix said in a statement. Reuters