'No Deal' Asiana Plan B Weighs on 2 Trillion Won Kian Fund Injection

[Asia Economy Reporter Kangwook Cho] The direction for handling Asiana Airlines, whose sale has been virtually canceled, will be decided on the 11th. The merger and acquisition (M&A) negotiations with HDC Hyundai Development Company, which dragged on for over 10 months, ended in a 'no deal,' triggering the full-scale operation of 'Plan B,' which places Asiana Airlines under creditor management. A 2 trillion won injection from the Industrial Infrastructure Fund (IIF) to normalize management is also expected to be implemented immediately. ▶Related article on page 4

According to the financial sector, the Industrial Competitiveness Enhancement Ministerial Meeting (ICEM) and the IIF Management Committee meeting will be held consecutively on this day to discuss the handling direction of Asiana Airlines.

The ICEM is expected to be attended by Hong Nam-ki, Minister of Strategy and Finance (Deputy Prime Minister for Economy), Eun Sung-soo, Chairman of the Financial Services Commission, and Lee Dong-gull, Chairman of KDB Industrial Bank, who officially began his reappointment schedule from this day. The meeting will discuss 'Plan B,' the management plan following the failure of the Asiana Airlines sale.

After the ICEM, it is anticipated that Kumho Industrial, the seller, and Asiana Airlines will notify the contract termination. However, the contract termination notice and disclosure are expected to occur only after the stock market closes on the same day to minimize market shock caused by the failure of the Asiana Airlines M&A.

If the acquisition fails, Asiana Airlines will be placed under creditor management. The creditors have already prepared 'Plan B,' which includes IIF support, perpetual bonds and equity conversion, and differential capital reduction. The creditors plan to push for management normalization of Asiana Airlines through a 2 trillion won injection from the IIF and, once market conditions improve, pursue resale. If support is decided, Asiana Airlines will become the first recipient of the IIF support. The plan also includes temporarily nationalizing Asiana Airlines by converting 800 billion won worth of perpetual bonds held by the Industrial Bank and Korea Eximbank into equity, then proceeding with management normalization and resale. If the perpetual bonds are converted into equity, the creditors will become the largest shareholder of Asiana Airlines with a 37% stake.

After the contract termination notice, the IIF Management Committee will convene, and the fund injection will be carried out immediately. Asiana Airlines has over 2 trillion won in short-term borrowings to repay within the next year. Especially, if the credit rating drops due to the 'no deal,' the asset-backed securities (ABS) trigger based on sales will be activated, requiring immediate repayment of 700 billion won.

Once under creditor management, business restructuring and workforce downsizing at Asiana Airlines are inevitable. The possibility of separating and selling subsidiaries such as Air Busan, Air Seoul, and Asiana IDT, which were part of the 'block sale' with Asiana Airlines, is also emerging. This is because the IIF support conditions include a ban on affiliate support. Workforce downsizing of employees will be excluded for at least six months. Instead, ways to reduce labor costs, such as shortening working hours, must be considered together.

Meanwhile, HDC Hyundai Development Company responded to the failure of the Asiana Airlines acquisition by saying, "There is nothing we can say."

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