A group of South Korea’s state-controlled banks is considering supporting SK Hynix in its $9 billion purchase of Intel’s memory chip business.

The so-called council for acquisition financing, which consists of Korea Development Bank (KDB), the Export-Import Bank of Korea (KEXIM), Nonghyup Bank and Industrial Bank of Korea, has started a review of the acquisition announced by the chipmaker on October 20 to decide whether to provide a debt financing package, industry sources said on October 22.

SK Hynix, one of SK Group’s affiliates, will pay 10.3 trillion won for the Intel unit. It plans to fund the acquisition with cash on hand and debt. The company’s cash and cash equivalent balances were about 5.26 trillion won at the end of June.

“The council is positive about providing a debt financing for the transaction,” said an industry insider.

The council was launched in September last year in reaction to Japan’s removal of South Korea from its whitelist of preferred trading partners. The purpose of the creation of the group was to help domestic companies in materials, parts and equipment sectors find growth opportunities and finance their outbound investment.

In 2019 SK Siltron, also part of SK Group, bought DuPont’s silicon carbide wafer business for $450 million. The deal was fully funded by a debt package provided by KDB, KEXIM and Nonghyup Bank after the council concluded that the deal would help reduce South Korea’s reliance on Japanese silicon wafer makers.

The acquisition of Intel’s memory chip unit is also aligned to the council’s strategic objective, industry watchers said. If the deal is completed, SK Hynix will hold the second largest share in the global market for NAND flash, which provides storage used in smartphones, computers and other gadgets.

SK Hynix is also expected to be able to borrow money from the council at more favorable terms than the market. Last year KDB, KEXIM and Nonghyup Bank provided loans to SK Siltron with the interest rate of between 3.23% and 3.6%, which was slightly lower than the market interest rate. The maturity of the loans was between five and seven years, longer than the company’s 3-year and 5-year bonds trading in the market. (Reporting by Byung-yoon Kim)

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