San-eun and Su-eun, Asiana and Doosan Heavy Industries Quickly Put Out Fires

Discussion on Additional Support for Asiana Today
High Possibility of Including Loan Repayment Extension
Speculation on KRW 500 Billion Perpetual Bond Conversion
Decision on Doosan Heavy's Foreign Currency Bond Loan Conversion Due on 27th
Approval Likely Unless Special Reasons Arise
Even After Overcoming Crisis, KRW 4.2 Trillion Maturing Debt This Year

[Asia Economy Reporter Jo Gang-wook] KDB Industrial Bank and Korea Eximbank are reportedly set to provide additional support to Asiana Airlines, which has fallen into financial difficulties due to the COVID-19 pandemic. Additionally, on the 21st, Eximbank will decide whether to convert Doosan Heavy Industries & Construction's $500 million (610 billion KRW) foreign currency bonds into loans. If the conversion of these bonds, maturing on the 27th, is approved, Doosan Heavy Industries will overcome the biggest hurdle in the first half of this year. While the urgent liquidity crises faced by Asiana Airlines and Doosan Heavy Industries seem likely to be resolved, the future situation remains uncertain.

According to financial sources, KDB Industrial Bank and Eximbank plan to hold a Credit Committee and an Expanded Credit Committee, respectively, on the same day to discuss support measures for Asiana Airlines.

An Eximbank official stated, "We plan to hold an Expanded Credit Committee chaired by President Visit Kyoo today," adding, "The agenda includes whether to convert Doosan Heavy Industries' foreign currency bonds into loans and whether to provide support to Asiana Airlines."

As the aviation industry was hit hard by the COVID-19 crisis, concerns have persisted in the market that HDC Hyundai Development Company's acquisition of Asiana Airlines might face setbacks. It has been reported that HDC Hyundai Development recently requested support from KDB Industrial Bank and Eximbank regarding Asiana Airlines' borrowings. Last year, KDB Industrial Bank and Eximbank acquired 500 billion KRW of perpetual bonds issued by Asiana Airlines and opened a credit line of 800 billion KRW. They also provided a standby LC (Letter of Credit) of 300 billion KRW, totaling 1.6 trillion KRW in support. The burden ratio between KDB Industrial Bank and Eximbank was approximately 7 to 3.

It is understood that the additional support measures to be discussed by KDB Industrial Bank and Eximbank likely include extending loan repayment deadlines. Initially, HDC Hyundai Development planned to participate in a paid-in capital increase of 1.47 trillion KRW for Asiana Airlines immediately after the completion of corporate merger approvals from various countries, repaying 1.17 trillion KRW in borrowings from KDB Industrial Bank and Eximbank. They also intended to raise the remaining acquisition funds through an additional 300 billion KRW public bond issuance and acquisition financing, completing the acquisition process with the payment of subscription money by the end of this month. However, delays in the corporate merger review schedule have postponed the main acquisition contract.

HDC Hyundai Development has indefinitely postponed the paid-in capital increase and corporate bond issuance schedules since the end of last month, making it difficult to reschedule within this month. Consequently, creditors may extend the repayment period for part of the borrowings that Asiana Airlines is scheduled to repay. Some speculate that the support plan may include converting 500 billion KRW worth of Asiana Airlines' perpetual bonds into equity or lowering the perpetual bond interest rate, which is currently around 7%. Financial circles predict that HDC Hyundai Development will review additional support measures for Asiana Airlines from the main creditors, KDB Industrial Bank and Eximbank, and then reschedule the paid-in capital increase and corporate bond issuance.

Eximbank will also decide whether to convert Doosan Heavy Industries' foreign currency bonds into loans. Doosan Heavy Industries has requested Eximbank, which provided the payment guarantee, to convert the $500 million foreign currency bonds maturing on the 27th into loans. This is the largest borrowing that Doosan Heavy Industries must repay in the first half of the year. Financial circles expect Eximbank to approve the loan conversion unless there are special reasons. It is also known that commercial banks such as NongHyup Bank and Woori Bank have leaned toward extending loan maturities. If the loan conversion is approved, Doosan Heavy Industries will overcome the immediate challenge in the first half of this year, but many obstacles remain. As of the end of last year, Doosan Heavy Industries' total borrowings amounted to 4.9 trillion KRW, with 4.2 trillion KRW maturing this year.

Early next month, creditors including KDB Industrial Bank and Eximbank are expected to announce a plan to normalize Doosan Heavy Industries' management. Currently, creditors have selected Samil Accounting Corporation as the due diligence agency following Doosan's submission of a self-rescue plan and are conducting due diligence on Doosan Heavy Industries and the entire Doosan Group.

A KDB Industrial Bank official said, "We will comprehensively review the validity and feasibility of the self-rescue plan, whether it aligns with restructuring principles, the creditors' financial support burden and repayment possibility, and the impact on national key industries."

This content was produced with the assistance of AI translation services.