SEOUL, June 9 (Korea Bizwire) — HDC Hyundai Development Co., a major construction company here, on Tuesday called for a renegotiation with the creditors of Asiana Airlines Inc. over its planned acquisition of the country’s No. 2 airline due to a sharp rise in debts and the growing impact of the new coronavirus on the airline industry.
In December, HDC Hyundai Development formed a consortium with major financial group Mirae Asset Daewoo to sign a deal to acquire a 30.77 percent stake in Asiana from Kumho Asiana Group, as well as new shares to be issued and Asiana’s six affiliates, for 2.5 trillion won (US$2.2 billion).
But airlines, hit hard by the COVID-19 pandemic, have suspended most of their flights on international routes since March and posted hefty losses in the first quarter.
“We are still committed to acquiring Asiana, but we want the (main creditor) Korea Development Bank and related parties to renegotiate the acquisition terms to reflect the current market conditions and the company’s current financial status,” HDC said in a statement.
HDC described the ongoing virus crisis as a “never expected and very negative factor,” which will affect its planned acquisition of the country’s second-biggest carrier.
The company also picked Asiana’s snowballed debts as another reason for the renegotiation that is “damaging the acquisition value of the carrier.”
Asiana’s debts have increased by 4.5 trillion won since July last year and its debt-to-equity ratio skyrocketed by 16,126 percent at the end of March from the end-July, it said.
HDC’s calls for the renegotiation comes after Asiana’s creditors sent an ultimatum Friday to the HDC to notify them of its intent to complete the acquisition by June 27.
Asiana’s net losses for the January-March quarter deepened to 683.26 billion won (US$555 million) from 89.18 billion won a year earlier.
HDC had reiterated its plan to acquire Asiana, dismissing speculation that it may have difficulties in taking over the company due to the economic fallout from the coronavirus outbreak.
Regulators in the United States, China, Kazakhstan, Uzbekistan, Turkey and South Korea approved HDC’s planned takeover of Asiana. Russia is the only remaining country that is still reviewing the integration.
To help Asiana stay afloat, the country’s two state lenders — the Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) — plan to inject a combined 1.7 trillion won into Asiana.
Last year, the two policy banks extended a total of 1.6 trillion won to the cash-strapped carrier.
In its latest self-help plans, Asiana has had all of its 10,500 employees take unpaid leave for 15 days a month since April until business circumstances normalize.
Asiana’s executives have also agreed to forgo 60 percent of their wages, though no specific time frame was given for how long the pay cuts will remain in effect.