Magnachip Semiconductor Corp.

Magnachip's power solutions business also has good growth potential across various products, including those supporting the electric vehicles industry. The sale of the foundry business has significantly reduced Magnachip's scale and increased its product and customer concentration. The company is now exposed to more volatility in revenue and earnings, given intense competition in its existing businesses that use relatively mature technology. In addition, we believe Magnachip's financial policy, including shareholder returns, capital expenditure, or mergers and acquisitions, will be crucial for the company to maintain its financial metrics. We believe the ownership by the financial sponsor may prevent Magnachip from maintaining a debt-free balance sheet over the next two to three years. This is because the sponsor is likely to

...Magnachip Semiconductor Corp. to have lower debt leverage post the conversion of exchangeable notes in March 2021. Holders of US$84 million in exchangeable notes elected to exchange the notes for the company's common stock. The outstanding obligations under the notes were therefore fully satisfied prior to the notes' maturity on March 1, 2021. Furthermore, in October 2020, Magnachip fully redeemed its US$224 million senior notes using net proceeds from the sale of its foundry business in September 2020. The company now does not have any outstanding debt. We therefore forecast Magnachip's adjusted debt (mostly pertaining to pension liabilities) will decline to about US$40 million at end-2021, from US$120 million at end-2020. We also expect the company will maintain a large liquidity buffer, given sufficient cash holdings of US$272 million as of June 2021....

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