'No Deal' Asiana Airlines Under Creditor Management... Plan B Involves 2 Trillion Won Kian Fund Injection (Comprehensive)

Discussion on Future Plans for Asiana Airlines Normalization at the Industry Competitiveness Enhancement Ministerial Meeting on the 11th
If Acquisition Fails, Creditors' Management System... Plan to Resell After Market Conditions Improve

[Asia Economy Reporter Jo Gang-wook] The direction for handling Asiana Airlines, whose sale has been virtually canceled, will be decided on the 11th. With the merger and acquisition (M&A) negotiations with HDC Hyundai Development Company, which dragged on for over 10 months, ending in a 'no deal,' the 'Plan B' to place Asiana Airlines under creditor management is expected to be fully activated. A 2 trillion won injection from the Industrial Stabilization Fund will also be promptly made to normalize management.

Meetings of the Ministerial Meeting on Industrial Competitiveness Enhancement and the Industrial Stabilization Fund Operation Deliberation Committee to be held consecutively on the 11th

According to the financial sector, on this day, the Ministerial Meeting on Industrial Competitiveness Enhancement (San-gyeong-jang meeting) and the Industrial Stabilization Fund (Gian Fund) Operation Deliberation Committee meeting will be held consecutively to discuss the handling direction of Asiana Airlines.

The San-gyeong-jang meeting is expected to be held in the morning. It is known that 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-geol, President of the Korea Development Bank, who will officially start his reappointment schedule from this day, will attend. The meeting is expected to discuss and finalize 'Plan B,' the management plan after the failure of Asiana Airlines' sale.

So far, the creditor group including the Korea Development Bank has been negotiating with HDC Hyundai Development Company over transaction conditions for a long time, but HDC Hyundai Development Company maintained its position on re-due diligence and did not give a definite answer on whether to acquire. In particular, although the Korea Development Bank proposed a 1 trillion won reduction in the acquisition price, HDC Hyundai Development Company still insisted on re-due diligence, leaving only the declaration of the failure of the Asiana Airlines acquisition. After the San-gyeong-jang meeting, it is expected that Kumho Industrial, the seller, and Asiana Airlines will notify the contract termination. However, the contract termination notice and disclosure are expected to be made only after the stock market closes on the day to reduce market shock caused by the failure of the Asiana Airlines M&A.

Creditors prepare 'Plan B'... Asiana Airlines to be the first company supported by the Industrial Stabilization Fund

If the acquisition fails, Asiana Airlines will be placed under creditor management. The creditors are currently preparing 'Plan B,' which includes support from the Industrial Stabilization Fund, perpetual bonds and equity conversion, and differential capital reduction. The creditors plan to inject 2 trillion won from the Industrial Stabilization Fund to promote the normalization of Asiana Airlines' management and then pursue resale when market conditions improve.

It is reported that the current Plan B prepared by the creditors will include the injection of 2 trillion won from the Industrial Stabilization Fund. If support is decided, Asiana Airlines will become the first recipient of the Gian Fund support. Also, the plan is expected to include converting 800 billion won of perpetual bonds held by the Korea Development Bank and the Export-Import Bank into shares, temporarily nationalizing Asiana Airlines, normalizing management, and then reselling. If the perpetual bonds are converted into shares, the creditors will become the largest shareholder of Asiana Airlines with a 37% stake.

After the contract termination notice, the Industrial Stabilization Fund Operation Deliberation Committee will be held, and the fund injection will be made immediately. The Operation Deliberation Committee has already established an emergency plan for fund support, anticipating the failure of the sale. As of the first half of this year, Asiana Airlines' total liabilities amounted to 11.5459 trillion won, with a debt ratio of 2366.1%. The short-term borrowings the company must repay within the next year exceed 2 trillion won. The current credit rating is 'BBB-' (under review for uncertainty), the lowest investment grade, which was maintained assuming HDC Hyundai Development Company's acquisition. Therefore, if the rating drops even one notch, the asset-backed securities (ABS) trigger based on sales will be activated, requiring immediate repayment of 700 billion won. Since the failure of the sale is certain, additional support is inevitable.

Kim Joo-hoon, chairman of the Industrial Stabilization Fund Operation Deliberation Committee, said, "Through the meeting on the 3rd, we have established an emergency plan in preparation for the failure of the sale," adding, "If the deal break is declared to prevent market turmoil, we will immediately inject the Gian Fund." He added, "The injection amount will be approximately 2 trillion won."

Asiana faces inevitable business restructuring and workforce downsizing... possibility of separate sales of subsidiaries

Once under creditor management, business restructuring and workforce downsizing at Asiana Airlines are expected to be inevitable. The possibility of separate sales of subsidiaries such as Air Busan, Air Seoul, and Asiana IDT, which were subject to 'block sale' with Asiana Airlines, is also emerging. This is because the conditions for Gian Fund support include a prohibition on affiliate support. However, employees are expected to be safe from workforce downsizing for at least six months. Instead, ways to reduce labor costs, such as shortening working hours, need to be considered together.

Choi Dae-hyun, Vice President of Corporate Finance at the Korea Development Bank, said, "We are preparing a management plan led by creditors through market stabilization, liquidity support, and perpetual bond equity conversion to ensure Asiana's operations can proceed normally," adding, "Specific measures such as separate sales of low-cost carriers (LCC) or handling of subsidiaries will be prepared promptly considering market conditions."

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.