Temporary Asiana Shareholders' Meeting Amid Acquisition 'Turbulence'... Increase in Issued Shares and CB Limits

HDC "Pursuing Despite Explicit Objection" Complaints... Impact on Stalled Acquisition Battle

Asiana Airlines, expected to enter renegotiations for acquisition with HDC Hyundai Development Company, held an extraordinary general meeting of shareholders on the morning of the 15th at its headquarters in Osoe-dong, Gangseo-gu, Seoul, where it resolved to increase the total number of shares to be issued and the limit of convertible bonds for capital expansion. After the shareholders entered, employees were removing the guide signs. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Yoo Je-hoon] As the sale process of Asiana Airlines becomes uncertain, the company held an extraordinary general meeting of shareholders on the 15th and initiated capital expansion through increasing the total number of issued shares and the convertible bonds (CB) issuance limit. This move drew attention as it was carried out amid public dissatisfaction expressed by HDC Hyundai Development Company, which is pushing forward with related procedures despite explicit disapproval.

On the morning of the same day, Asiana Airlines held an extraordinary general meeting at its headquarters in Osoe-dong, Gangseo-gu, Seoul, and approved amendments to the articles of incorporation including ▲expansion of the total number of issued shares ▲increase of the CB issuance limit. As a result of this meeting, the limit on the number of shares Asiana Airlines can issue was expanded from 800 million to 1.3 billion shares, and the CB issuance limit was increased from the previous 700 billion KRW to 1.6 trillion KRW.

Previously, in the extraordinary general meeting held in June last year, Asiana Airlines increased the CB issuance limit from 500 billion KRW to 700 billion KRW, and in the regular general meeting in March, the total number of issued shares was expanded from 600 million to 800 million shares. These were preliminary steps for the sale process, including creditor support and new share issuance by the acquirer.

The reason Asiana Airlines further increased the issuance limits for shares and CBs again is due to the rapid deterioration of its financial condition caused by the COVID-19 crisis that intensified this year. The repeated delays in HDC Hyundai Development Company's acquisition also played a part. In fact, Asiana Airlines’ total liabilities on a consolidated basis surged from 12.5951 trillion KRW to 13.204 trillion KRW in the first quarter, and the debt ratio reached approximately 6280%. The capital erosion rate also reached about 81%.

Industry insiders expect that in the second quarter, when the COVID-19-induced "skyway shutdown" (temporary suspension of operations) became full-scale, Asiana Airlines is highly likely to enter a state of complete capital erosion. If this situation continues, early repayment triggers could be activated for aircraft lease liabilities and asset-backed securities (ABS) of accounts receivable, making capital expansion essential for Asiana Airlines.

Accordingly, creditors including KDB Industrial Bank have decided to push for financial support amounting to 1.7 trillion KRW for Asiana Airlines. For this, expanding the CB issuance limit is unavoidable.

However, it is uncertain how this increase in issuance limits will affect the stalled merger and acquisition (M&A) of Asiana Airlines. HDC Hyundai Development Company, which is engaged in a tug-of-war with creditors over renegotiating acquisition conditions, expressed dissatisfaction in a previous statement, saying, "Despite the explicit disapproval of the HDC Hyundai Development Company consortium, Asiana Airlines is deciding on additional borrowing of 1.7 trillion KRW and is pushing forward with related amendments to the articles of incorporation and holding an extraordinary general meeting."

An Asiana Airlines official explained, "At present, it has not been decided how the capital expansion will proceed," adding, "This proactive increase in issuance limits is to timely promote capital expansion that will be pursued in some form in the future."

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