This file photo shows HDC’s company logo and Asiana Airlines’ planes at a local airport. (Yonhap)
SEOUL, Sept. 11 (Korea Bizwire) — South Korea said Friday it will inject 2.4 trillion won (US$2 billion) into Asiana Airlines Inc. after a local property developer scrapped its plan to acquire the debt-ridden carrier amid the growing impact of the coronavirus on the airline industry.
Kumho Industrial Co., which owns a controlling stake in the country’s second-biggest airline, notified HDC Hyundai Development Co. earlier in the day of the termination of the drawn-out deal after failing to narrow differences over acquisition terms.
In an online briefing, Choi Dae-hyun, executive director of the state-run Korea Development Bank (KDB), said Kumho Industrial’s decision was “regrettable” from the point of the airline’s main creditor.
To help Asiana stay afloat, the Key Industry Stabilization Fund (KISF) operated by the KDB will extend a 2.4 trillion won credit line for the cash-strapped carrier, the state lender said in a statement.
“The KISF made the decision to avoid massive layoffs (at Asiana) following the deal’s rupture and minimize the impact on the economy amid a prolonged COVID-19 pandemic,” the statement said.
In the past two years, the KDB and the Export-Import Bank of Korea (Eximbank) already injected a financial lifeline totaling 3.3 trillion won into Asiana.
With the collapse of the deal, Asiana will be placed under the control of the creditors, undergo some restructuring and be put up for sale again, the KDB said.
Asiana said it will make all-out efforts to enhance the company’s value by optimizing routes and cutting further costs, while carrying out self-help measures under the guidance of the creditors.
Asiana has suspended most of its flights on international routes since March, dealing a further blow to its bottom line.
Its net losses deepened to 432.88 billion won in the January-June period from 267.4 billion won a year earlier. Its overall debts reached a whopping 11.55 trillion won at the end of June.
A large model airplane in the lobby of Asiana Airlines’ headquarters in Gangseo Ward, western Seoul. (Yonhap)
The deal’s collapse is the country’s second scuttled airline deal this year following Jeju Air Co.’s decision not to acquire Eastar Jet Co. in July due to the virus impact on air travel.
In December, the HDC-led consortium signed the deal to acquire a 30.77 percent stake in Asiana Airlines from Kumho Industrial, a construction unit of airline-to-chemicals conglomerate Kumho Asiana Group, as well as new Asiana shares to be issued and the carrier’s six affiliates, for 2.5 trillion won.
The consortium was scheduled to complete the acquisition by June 27. But in June, it demanded renegotiations with Kumho and the creditors over acquisition terms due to worsening business environments brought on by the infectious illness.
KDB Chairman Lee Dong-gull and HDC Chairman Chung Mong-gyu met three times to seek a breakthrough in the drawn-out deal. Lee reportedly suggested reducing the acquisition price by 1 trillion won for Asiana, to reflect the pandemic’s impact on the airline industry.
But HDC didn’t accept the offer and instead once again demanded another round of due diligence on the carrier, which was already rejected by the creditors and Kumho Industrial.
HDC said it will take legal action against Kumho Industrial’s notification of the deal’s rupture.
HDC is widely expected to recover the down payment worth 250 billion won it paid last year for Asiana. KDB Chairman Lee said HDC does not have the rights to the down payment as it failed to make a decision by the final deadline.
(Yonhap)
