Startled by Airline Nationalization Controversy... Financial Services Commission Chairman: "No Nationalization"

Eun Sung-soo, Chairman of the Financial Services Commission

[Asia Economy Reporter Kim Hyo-jin] Eun Sung-soo, Chairman of the Financial Services Commission, stated regarding support for key industries that "there will be no nationalization of companies." This was conveyed in a letter sent on the 24th to experts from various fields. It appears to be a swift effort to quell concerns about nationalization amid voices expressing worries over the support methods and conditions for Korean Air.

In the letter, Chairman Eun emphasized, "The government's firm principle is to guarantee the autonomy of corporate management."

On the same day, the Korea Development Bank and the Export-Import Bank of Korea decided to urgently inject 1.2 trillion won into Korean Air.

This includes lending 200 billion won as operating funds, purchasing asset-backed securities (ABS) worth 700 billion won issued based on future cargo transportation accounts receivable, and acquiring 300 billion won worth of perpetual bonds with stock conversion rights. If the perpetual bonds are converted into stocks in the future, the government will hold an estimated 10.8% stake in Korean Air.

Earlier, on the 22nd, the government announced support measures for seven industries including aviation, shipping, automobile, shipbuilding, machinery, electricity, and telecommunications, involving the establishment of a 40 trillion won Key Industry Stabilization Fund. Conditions such as employment retention, restrictions on bonuses, dividends, and treasury stock acquisition to prevent moral hazard, and sharing of profits upon normalization were attached. These 'fundamental principles' were applied to the support for Korean Air.

There was analysis suggesting that the government might intervene in disputes over management rights while holding shares in Korean Air, a core affiliate of the Hanjin Group.

Regarding this, Chairman Eun explained, "Even if the fund acquires some common shares through exercising conversion rights of stock-linked securities, it will not exercise voting rights," adding, "The acquisition of stock-linked securities by the fund is to share the benefits with the public when corporate value rises due to the fund's financial support."

He continued, "Support conditions such as employment retention are essential measures considering the purpose of the fund," and "The very purpose of establishing the fund is to protect valuable jobs."

Chairman Eun also stated, "The fund plans to prioritize support for the seven key industries initially but will operate flexibly in consideration of the financial situation of each industry in the future."

He added, "At this moment when the shock of COVID-19 is spreading throughout the economy, the most important thing is to act as quickly as possible," and "The government will closely consult with the National Assembly to promptly complete necessary procedures such as legal amendments for establishing the fund and state guarantees for fund bonds."

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