MagnaChip Files for Chapter 11

(Reuters) – MagnaChip Semiconductor said on Friday its parent companies filed for Chapter 11 bankruptcy protection in the United States, after a South Korean investment fund acquired assets of the troubled chip maker.

South Korea-based MagnaChip said on Thursday it had signed a deal with a fund led by KTB Securities (030210.KS) to acquire MagnaChip and its operating and sales affiliates.

Its South Korean operations for production and sales and sales units in Europe, Taiwan and Japan are not part of the Chapter 11 filing, MagnaChip said.

“(MagnaChip) is committed to completing the restructuring as quickly as possible, and plans to emerge from the (sale) process in late 2009 under a new ownership structure and essentially debt-free,” it said in a statement.

The chip maker, formerly a unit of Hynix Semiconductor (000660.KS) and bought by CVC and Francisco Partners in 2004, was put up for sale as it struggled under heavy debt and a severe industry downturn.

The U.S. parent firms hold all debt owed by MagnaChip, while the KTB fund is acquiring assets, goodwill and employees of the company.

Magnachip, which makes image sensors for mobile phones and display driver chips for flat-screens, supplies to major Asian technology companies including LG Display Co Ltd (034220.KS) and Sharp Corp (6753.T).

In a filing with the United States Bankruptcy Court for the District of Delaware, MagnaChip listed assets of up to $50 million and estimated liabilities of more than $1 billion.

(Reporting by Ajay Kamalakaran and Rhee So-eui; Editing by Lincoln Feast)