Kumho Petrochemical Discusses Response Measures to Asiana Equal Capital Reduction

"Equal Capital Reduction Means Passing Management Failures as Losses to Shareholders"
Small Shareholders Also Protest

[Asia Economy Reporters Hwang Yoon-joo, Yoo Je-hoon] Kumho Petrochemical (Kumho Seokhwa), the second largest shareholder (11.02%) of Asiana Airlines, is considering legal action regarding the decision on the equal capital reduction without compensation.

According to financial and business circles on the 4th, Kumho Seokhwa held a countermeasure meeting on the same day to discuss all possible measures, including legal action, concerning Asiana Airlines' decision on a 3-to-1 equal capital reduction without compensation. A Kumho Seokhwa official stated, "We agree with the capital reduction for financial structure improvement, but the equal method, where other shareholders unilaterally bear losses caused by management failure, is not right," adding, "The Korea Development Bank should withdraw this decision and discuss a differential capital reduction."

An equal capital reduction without compensation means that shareholders lose shares equally according to the decided reduction ratio without receiving any compensation when a company reduces its capital. All shareholders, including Asiana Airlines' largest shareholder, will have their shares reduced to one-third equally. This is why Kumho Seokhwa strongly opposes the creditors' decision on the equal capital reduction without compensation. In particular, Kumho Seokhwa is concerned that if the equal capital reduction is implemented, it will share the responsibility for management failure with the major shareholder (former Kumho Group Chairman Park Sam-gu), potentially leading to allegations of breach of trust. It is known that before the public announcement the day before, the president of Kumho Seokhwa directly conveyed opposition to the equal capital reduction in writing.

Minority shareholders are also showing resistance. A shareholder of Asiana Airlines posted on the Blue House's public petition board, "Instead of implementing an equal capital reduction without compensation, a differential capital reduction should be carried out," and added, "This is very unfair. Please help."

There is also a view that the Korea Development Bank decided on the equal capital reduction to avoid responsibility for Asiana Airlines' restructuring failure. Usually, creditors such as the Korea Development Bank decide on differential capital reductions to hold major shareholders accountable in restructuring companies. In principle, the major shareholder Kumho Industrial and the same person, former Kumho Group Chairman Park Sam-gu, should have their shares reduced at a higher rate.

The ownership structure of Asiana Airlines is Kumho Express → Kumho Industrial → Asiana Airlines. Asiana Airlines is an affiliate of Kumho Industrial, and in the case of a differential capital reduction, the impairment loss on the shares held must be reflected in the financial statements. In this case, the capital of Kumho Industrial and its consolidated entity Kumho Express will decrease, and if Kumho Express's debt ratio soars and it becomes insolvent, the Korea Development Bank's planned support fund of 400 billion KRW for Kumho Express may also become difficult to recover.

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