SK hynix seeks to sell water treatment center to secure funds

SK hynix Inc. headquarters in Icheon, Gyeonggi Province [Photo by Yonhap]

South Korea’s SK hynix Inc. announced on Monday that it is seeking to sell its water treatment center in Icheon, Gyeonggi Province to SK reit Co. to secure funds for future investment and enhance financial soundness.

SK reit is another subsidiary of SK Group which engages in the real estate investment trust (REITs) business.

“With facilities investment in the semiconductor industry expanding globally, it has become a trend to improve asset efficiency and financial soundness through asset liquidity,” said the world‘s third-largest memory chip maker in a statement. “In line with this trend, we are pursuing the liquidity of non-core assets such as the water treatment center.”

SK hynix plans to use the proceeds from the sale of the water treatment center for technology development and future industrial investments. The sale price is estimated to be around 1 trillion won ($769.95 million).

SK hynix has encountered difficulties in raising funds as it has posted a cumulative loss worth 5 trillion won for the past two quarters in a row. Industry insiders expect the company to continue to face losses until the fourth quarter of this year because, in a situation where it is losing money even when selling semiconductors amid a sharp downturn in the chip industry, SK hynix still has a considerable amount of money to spend. Due to the recent interest rate hikes, the company’s interest costs increased by 220 percent to 214.2 billion won in the first quarter of this year alone from 95.4 billion won in the same period last year. Borrowings also increased by more than 11 trillion won during the same period, totaling 28.76 trillion won.

In addition to this, a substantial amount of funds needs to be invested to enhance semiconductor competitiveness.

SK hynix has been focusing on securing liquidity through borrowings and issuing corporate bonds, but in the end, it seems to have opted for asset sales.

SK reit, in the meantime, filed an application with the Ministry of Land, Infrastructure and Transport on Monday for approval for the transaction. Under the current law, the ministry’s approval is required for REITs to incorporate new assets.

SK hynix and SK reit plan to finalize the transaction amount after a board meeting this month, pending government approval. The chipmaker will rent the water treatment center from SK reit after the selloff, the company said.