Yonhap News Agency reports that HDC Hyundai Development Co., a major construction company, on June 9 called for a renegotiation with the creditors of Asiana Airlines Inc. over its planned acquisition of South Korea’s No. 2 airline due to a sharp rise in debts and the growing impact of the new coronavirus on the airline industry.
In December, HDC Hyundai Development formed a consortium with major financial group Mirae Asset Daewoo to sign a deal to acquire a 30.77 percent stake in Asiana from Kumho Asiana Group, as well as new shares to be issued and Asiana’s six affiliates, for KRW2.5 trillion (US$2.2 billion).
But airlines, hit hard by the COVID-19 pandemic, have suspended most of their flights on international routes since March and posted hefty losses in the first quarter, Yonhap says.
“We are still committed to acquiring Asiana, but we want the (main creditor) Korea Development Bank and related parties to renegotiate the acquisition terms to reflect the current market conditions and the company’s current financial status,” HDC said in a statement.
Yonhap relates that HDC described the ongoing virus crisis as a “never expected and very negative factor,” which will affect its planned acquisition of the country’s second-biggest carrier.
The company also picked Asiana’s snowballed debts as another reason for the renegotiation that is “damaging the acquisition value of the carrier,” Yonhap relays.
Asiana’s debts have increased by KRW4.5 trillion since July last year and its debt-to-equity ratio skyrocketed by 16,126 percent at the end of March from the end-July, it said.
HDC’s calls for the renegotiation comes after Asiana’s creditors sent an ultimatum on June 5 to the HDC to notify them of its intent to complete the acquisition by June 27, according to Yonhap.
Asiana’s net losses for the January-March quarter deepened to KRW683.26 billion (US$555 million) from KRW89.18 billion a year earlier, Yonhap discloses.
HDC had reiterated its plan to acquire Asiana, dismissing speculation that it may have difficulties in taking over the company due to the economic fallout from the coronavirus outbreak, adds Yonhap.
Yonhap notes that regulators in the United States, China, Kazakhstan, Uzbekistan, Turkey and South Korea approved HDC’s planned takeover of Asiana. Russia is the only remaining country that is still reviewing the integration.
To help Asiana stay afloat, the country’s two state lenders — the Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) — plan to inject a combined KRW1.7 trillionn into Asiana, according to Yonhap. Last year, the two policy banks extended a total of KRW1.6 trillion to the cash-strapped carrier.
In its latest self-help plans, Asiana has had all of its 10,500 employees take unpaid leave for 15 days a month since April until business circumstances normalize, Yonhap notes. Asiana’s executives have also agreed to forgo 60 percent of their wages, though no specific time frame was given for how long the pay cuts will remain in effect, adds Yonhap.
Headquartered in Osoe-Dong Kangseo-Gu, South Korea, Asiana Airlines Incorporated is engaged in air transportation, engineering, construction, facilities, electricity, ground handling, catering, communication, logo products and e-business. Asiana Airlines is a unit of the Kumho Asiana Group, a South Korean conglomerate whose business portfolio includes tire manufacturing and chemical production.