Chairman Kang Seok-hoon of Korea Development Bank has expressed his intention to not push for a forced sale in connection with the shipping company HMM. Regarding the merger of Korean Air and Asiana Airlines, he mentioned the possibility of a low recovery of public funds and put pressure on the Asiana board of directors.
Chairman Kang made these remarks on Oct. 24 during his participation in the National Policy Committee’s audit of financial public institutions, discussing the current issues surrounding the restructuring of KDB.
Yoon Joo-kyung, a lawmaker from the ruling People Power Party, asked, “There are many concerns about selling HMM. If there are no suitable bidders, will it be sold in this auction?” Chairman Kang responded by saying, “If there are no suitable bidders, there is naturally no reason to sell it. So, it should not be done.”
The KDB and the Korea Ocean Business Corporation, among others involved in the sale of HMM, have selected Dongwon Industries, the Harim-JK Partners consortium, and LX International as the shortlist of qualified bidders. They have been conducting due diligence operations since Sept. 6. The preferred bidder is expected to be determined through a final bid in November.
However, the possibility of the sale falling through has been consistently raised due to the fact that the capital mobilization of the bidders, which ranges from 5 to 7 trillion won (US$3.71 billion to 5.19 billion), significantly falls short of HMM’s valuation. Given the circumstances, Chairman Kang mentioned the possibility of the bid’s rejection for the first time.
During the parliamentary audit on that day, questions about the merger of Korean Air and Asiana Airlines were also raised. In response to a question by Kang Min-guk, a lawmaker from the ruling People Power Party, who asked about the “anticipated losses in the event of the merger falling through,” Chairman Kang stated, “The likelihood of recovering the previously invested 3.6 trillion won in public funds becomes very low.”
Chairman Kang explained, “If Korean Air and Asiana Airlines merge, the likelihood of recovering the policy funds that have been invested increases. Not only the 1.5 trillion won in perpetual bonds but also the remaining amount can be recovered through the operation of the airlines.” He added, “On the contrary, if the merger does not happen, the probability of recovery becomes very low.”
Until now, institutions like KDB and the Export-Import Bank of Korea (KEXIM) have poured 3.6 trillion won in public funds into Asiana Airlines. Then, a merger plan for Korean Air and Asiana Airlines was announced through KDB in November 2020.
However, the possibility of the merger remains uncertain. Previously, the European Union (EU) competition authorities and the European Commission expressed concerns about it, fearing competition limitations on European cargo routes and demanding relevant corrective actions. As a result, Asiana Airlines has decided to hold a board meeting on Oct. 30 to determine whether to sell its cargo business division. Also, within Asiana Airlines, there is significant resistance to selling the lucrative cargo business division, particularly from labor unions and other internal stakeholders.
In this regard, Chairman Kang said, “If the Asiana board decides to preserve [the cargo business division], we cannot predict how much of the taxpayers’ money or public funds will be injected.” He continued, “I hope that this merger will take place even from that perspective, and considering all factors, I believe the Asiana board will make a reasonable decision.”