Asiana Airlines Sale Ultimately Fails... Becomes at Least 2 Trillion Won 'Kian Fund No.1'

Industrial Bank and Creditors Prepare Plan B
Contract Termination Notice Possible This Week
Government Stake Nears Half if 2 Trillion Won Injected into Kian Fund

[Asia Economy Reporter Jo Gang-wook] The 10-month-long sale process of Asiana Airlines has ultimately ended in a 'no deal,' making it inevitable for the Industrial Stabilization Fund to be injected into Asiana Airlines, whose financial soundness has deteriorated. The creditors, including KDB Industrial Bank, plan to promptly activate 'Plan B,' which places Asiana Airlines under creditor management, and decide on injecting at least around 2 trillion KRW from the Industrial Stabilization Fund. With the failure of the Asiana Airlines sale, it will become the first company to receive support from the Industrial Stabilization Fund, which had been in a 'business suspension' state for 100 days since its launch.

According to the financial sector on the 4th, the creditors have begun preparations to activate Plan B following the sale failure. Even after the final negotiation between Lee Dong-gul, chairman of KDB Industrial Bank, and Chung Mong-gyu, chairman of HDC Hyundai Development Company, HDC Hyundai Construction & Engineering insisted on a re-inspection, leading the creditors to judge that HDC Hyundai Construction & Engineering has no intention to acquire. They plan to notify contract termination as early as this week.

Accordingly, if the deal is finally canceled, Asiana Airlines will move under creditor management, and the government is expected to support Asiana Airlines with the Industrial Stabilization Fund. The amount and method of support will be decided by the Fund Operation Deliberation Committee, with creditors reportedly considering injecting around 2 trillion KRW from the fund.

As of the first half of this year, Asiana Airlines' total liabilities amounted to 11.5459 trillion KRW, with a debt ratio reaching 2366.1%. The short-term borrowings the company must repay within the next year exceed 2 trillion KRW. Its current credit rating is 'BBB-' (under review for uncertainty), the lowest investment grade, which was maintained assuming HDC Hyundai Construction & Engineering's acquisition. Therefore, if the rating drops by just one notch, the asset-backed securities (ABS) trigger based on sales will be activated, requiring immediate repayment of 700 billion KRW. Since the sale failure has become certain, additional support is unavoidable.

Previously, KDB Industrial Bank and the Export-Import Bank of Korea supported Asiana with a total of 1.6 trillion KRW in April last year. This included the acquisition of 500 billion KRW worth of perpetual bonds issued by Asiana. Then, in April this year, an additional 1.7 trillion KRW was provided, including the acquisition of 300 billion KRW in perpetual bonds. These are convertible bonds, and KDB Industrial Bank and the Export-Import Bank disclosed in early July that they hold 93,991,174 shares and 37,051,827 shares of Asiana Airlines convertible bonds (CB), respectively. Upon conversion to stock, they would secure 26.53% and 10.46% ownership, respectively. The total holding is 36.9%, surpassing Kumho Industrial (30.7%), the current major shareholder of Asiana. If 2 trillion KRW from the Industrial Stabilization Fund is injected, the government will acquire about 200 billion KRW worth of shares, approximately 10% of the support amount, bringing total ownership close to half.

Meanwhile, the 40 trillion KRW Industrial Stabilization Fund, which marks its 100th day since launch today, has yet to receive any support applications from large corporations. Although the supported industries increased from 2 to 9, the fund suffered a 'box office flop' reputation, prompting the government to hurriedly launch a program in early last month to provide 5.5 trillion KRW in funds to period industry subcontractors. There are over 2,000 target companies, and the subcontractors' financial conditions are severe, raising government concerns about early depletion of funds. However, the first loan to subcontractors was only made on the 31st of the same month. Ultimately, the title of the first large corporation to receive fund support goes to Asiana Airlines, whose sale failed.

A financial sector official said, "The fact that Asiana Airlines became the first recipient of the Industrial Stabilization Fund due to the failed sale reflects the situation where taxpayers' money was prepared but not properly utilized," adding, "It is necessary to adjust conditions such as lowering interest rates and easing the ratio of convertible bonds (CB) and bonds with warrants (BW)."

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