Industrial Bank of Korea: "Investment in Hanjin Kal is Not to Protect Current Affiliate's Management Rights"

by Jo Kangwook

Published 23 Nov.2020 10:11(KST)

Investment in Hanjin Kal to Efficiently Support Restructuring of the Aviation Industry
Hanjin Kal as the Control Tower for National Airline Integration and Reorganization of LCC and Aviation Subsidiary Functions
1.9 Trillion Won Already Provided to Both Airlines in 2020 to Overcome the COVID-19 Crisis

As Korean Air's acquisition of Asiana Airlines is underway, on the 17th, Korean Air and Asiana Airlines passenger planes are parked behind the construction site of the 4th runway at Incheon International Airport. 2020 11. 17

[Asia Economy Reporter Jo Gang-wook] The Korea Development Bank (KDB) recently stated on the 23rd regarding the controversy over preferential treatment in Korean Air's acquisition of Asiana Airlines, "The investment in Hanjin KAL is not to protect the current controlling shareholders' management rights."

In a press release on the same day, KDB emphasized this point and explained, "Investment in common shares of Hanjin KAL is necessary to successfully carry out the integration of the two major national airlines and the restructuring of the aviation industry."

KDB's position is that considering the importance of the current aviation industry restructuring and competitiveness enhancement plan, which includes the integration of the two major national airlines and the reorganization of functions of LCCs and related subsidiaries, it is necessary for KDB to participate directly as a shareholder in Hanjin KAL to support the successful implementation of the restructuring and to faithfully perform the role of a monitor for sound and ethical management.

KDB explained, "This restructuring work includes not only the integration of the two major national airlines but also the reorganization of functions of LCCs and ground handling companies under both airlines, so Hanjin KAL will serve as the control tower for overall integration and functional reorganization as a holding company."

It added, "Since detailed integration and reorganization plans and operational systems will be decided during the planning stage of the upcoming PMI, KDB's investment in Hanjin KAL, the control tower, will enable it to perform its intended role regardless of the form of the integration and reorganization plan designed."

However, KDB stated, "Although investing in Korean Air, which is the most important part of the integration and reorganization plan, is significant, it is only one pillar, and investing solely in Korean Air has limitations in efficiently supporting the overall restructuring work."

In particular, KDB currently holds 0.18 trillion KRW in perpetual convertible bonds of Korean Air and 0.57 trillion KRW in those of Asiana Airlines. The exchangeable bonds in this transaction target 0.3 trillion KRW worth of Korean Air shares held by Hanjin KAL. Therefore, KDB is participating in capital investment in the two major national airlines with more than 0.5 trillion KRW through the acquisition of common shares of Hanjin KAL.

For this reason, KDB stated, "The practical benefits of KDB directly participating in additional capital expansion of Korean Air are not significant, whereas new investment in Hanjin KAL, which will serve as the control tower for detailed integration and functional reorganization, is judged to have great significance and utility in supporting and supervising the overall restructuring work."

KDB, together with the Export-Import Bank of Korea, has provided emergency support of 2.9 trillion KRW (1.9 trillion KRW from KDB) newly to Korean Air and Asiana Airlines this year alone, actively playing a role in helping the two major national airlines overcome the COVID-19 crisis.

Therefore, KDB stated, "As the main creditor bank and largest creditor of both companies, KDB can be considered the biggest stakeholder, and it aims to contribute to enhancing and protecting the value of all related companies' shareholders, workers, creditors, and domestic airline consumers through overcoming the COVID-19 crisis in the domestic aviation industry."

Additionally, KDB emphasized, "As a policy financial institution, we understand better than anyone the significance and importance of the fundamental restructuring of national key industries and bear the responsibility. We will respond calmly and firmly to any groundless suspicions and criticisms and faithfully perform the role of a monitor for sound and ethical management to ensure the successful implementation of this aviation industry restructuring work."