Sept 26 (The following statement was released by the rating agency)
Fitch Ratings has affirmed Korea-based SK Hynix Inc.'s (Hynix) Long-Term
Foreign- and Local-Currency Issuer Default Ratings (IDRs), as well as its senior unsecured
rating at 'BB'. The Outlook on the IDRs is Positive.
Fitch has simultaneously withdrawn all the ratings.
The ratings have been withdrawn as they are no longer considered by Fitch to be
relevant to the agency's coverage. Fitch will no longer provide rating or
analytical coverage of this issuer.
KEY RATING DRIVERS
Favourable operational outlook: The Positive Outlook reflects Fitch's view that
Hynix will continue to benefit from the tighter supply-demand balance over the
medium term following the merger of Elipda Memory Inc. and Micron Technology
Inc., the world's third- and fourth-largest dynamic random access memory (DRAM)
In addition, DRAM makers' conservative capex and the gradual exit of the
second-tier Taiwanese makers from commodity DRAM should lessen competition,
which should be positive for Hynix. However, the company's market position as
the second-largest maker may be pressured if Elpida-Micron benefits from an
increased scale after the merger.
Limited Impact from Fire: Fitch does not foresee any significant impact on the
company's credit profile from the fire that occurred in one of its Chinese
manufacturing plants in September 2013. This is because the affected plant will
return to normal operation in October 2013 while the strong DRAM pricing trend
is likely to continue in the short term given tight supply. We forecasts Hynix
to generate EBIT margin in the high-teens during H213 (Q213: 28%).
Leverage to improve: Fitch forecasts Hynix's funds flow from operations
(FFO)-adjusted leverage will remain well below 2x in medium term (2012: 2x) as
improved profitability and conservative capex will lead to positive free cash
Cyclicality still key risk: While we believe improvements in the supply-demand
balance will reduce cash flow volatility, the memory semiconductor industry will
remain exposed to cyclicality, which will continue to be a key weakness in
Hynix's credit profile.
Support from SKT: Hynix's ratings are a notch above its standalone level of
'BB-' to incorporate the implied support from SK Telecom Co., Ltd. (SKT,
A-/Stable) with its 21% ownership of Hynix. Fitch believes that Hynix is an
important asset for the SK Group.