Asiana Airlines Plan B Launched... Will It Become Hynix or Daewoo Shipbuilding & Marine Engineering?

Creditors Consider Possibility of Sale Failure... Review Additional Funding and Future Legal Disputes
Discussing Restructuring Under Creditors Instead of Sale to Clean Up Non-Performing Assets
Also Considering Hynix Case, Which Became a Key SK Group Affiliate Amid Aviation Industry Recovery

Asiana Airlines, expected to renegotiate the 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 Jo Gang-wook] The creditor group, including the Korea Development Bank and the Export-Import Bank of Korea, has begun preparing a 'Plan B' related to the sale of Asiana Airlines. As HDC Hyundai Development Company publicly requested a 12-week re-inspection of Asiana, causing difficulties, the creditor group is reviewing not only additional financial support but also potential future legal disputes and creditor management plans. This appears to be in consideration of the possibility that the sale may fail.

According to financial sources on the 28th, the creditor group is reportedly struggling to prepare countermeasures for various scenarios under the direction of Lee Dong-gul, chairman of KDB Korea Development Bank. The first aspect under review is the estimation of funds Asiana Airlines will need going forward. Earlier in April, the creditor group injected 1.7 trillion won into Asiana Airlines, which was experiencing a liquidity crisis due to the impact of COVID-19. Asiana Airlines posted a net loss of 683.4 billion won in the first quarter of this year, and its debt ratio sharply worsened from 1387% at the end of last year to 6280% at the end of March this year.

The newly provided 1.7 trillion won is a 'credit line' in the form of a negative account. It is known that Asiana has drawn about 400 billion won from this amount. The problem is that this fund is likely to be exhausted around the end of this year. Currently, of Asiana Airlines' 82 aircraft, 52 are leased, and approximately 500 billion won is spent annually on lease costs. If the acquisition fails or negotiations are prolonged, additional funding is considered inevitable.

Concrete discussions on future operational plans focusing on the possibility of the sale falling through are also underway. Instead of a sale, the airline would be placed under creditor management. Accordingly, if the M&A fails, Asiana Airlines is expected to undergo intensive restructuring under the creditor group for the time being to shed non-performing assets. Even if a resale of Asiana Airlines is attempted, it is expected to be difficult to find a buyer easily given the aviation industry's severe management difficulties.

Moreover, if negotiations with HDC Hyundai Development Company break down, the creditor group is also considering the possibility of legal disputes over the refund of the deposit. HDC Hyundai Development Company paid a deposit of 250 billion won when signing the Share Purchase Agreement (SPA) with Kumho Industrial for Asiana Airlines in December last year. A similar situation actually occurred during the sale of Daewoo Shipbuilding & Marine Engineering. In 2008, Hanwha Group pursued the acquisition of Daewoo Shipbuilding & Marine Engineering but gave up due to the global financial crisis. Hanwha forfeited a deposit of 315 billion won, which was 5% of the acquisition price of 6.3 trillion won, but later recovered 126 billion won through litigation.

However, the creditor group still emphasizes that after HDC Hyundai Development Company's acquisition, Asiana Airlines could become a case similar to SK Hynix, which has become a core affiliate of the SK Group following a rebound in the aviation industry.

A creditor group official said, "It is basic to prepare countermeasures for various possibilities in any business negotiation," adding, "We will keep the negotiation channel open with HDC Hyundai Development Company and verify the sincerity of their acquisition intentions."

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