Creditors of cash-strapped Kumho Asiana Group are reportedly planning to demand that the group sell off prime assets and present a viable debt repayment plan.
They are considering extension of a one-year memorandum of understanding (MOU) on improving its financial standing later this week if they can believe that the group will secure sufficient liquidity and win back market trust by selling off its high-value assets.
The main creditors of the conglomerate, such as Korea Development Bank (KDB), Export-Import Bank of Korea, SC Bank and Hyundai Investment Partners, said such measures should be included in Asiana Airlines’ normalization plans, according to financial industry sources on March 31.
An official from the creditors said, “The resignation of Park Sam-koo from the posts of group chairman and CEO of flagship Asiana Airlines and Kumho Industrial, the conglomerate's holding company, is not enough. Asiana needs to draw up specific plans how it would repay debts in the future.”
The prime assets being discussed for possible sales include budget carriers Air Busan and Air Seoul, Kumho Resort, Kumho Industrial, Asiana IDT and Asiana Airport Service, along with stakes in a local golf course and real estate holdings, like Asiana Town.
In this regard, some also expect that the creditors can loosen up some of 1.20 trillion won (US$1.06 billion) worth of collateral for these assets in order to secure the repayment of short-term and long-term loans.
The minimum amount of leasing costs for Asiana’s 82 planes and 30 engines is estimated at 3 trillion won (US$2.64 billion). Foreign financial institutions are taking part in covering the costs so the creditors think that the group needs to secure sufficient cash.
An official from the creditors said, “Unlike Daewoo Shipbuilding & Marine Engineering and Kumho Tire, Asiana borrowed much more funds from the market than from financial institutions. The company needs to come up with intensive funding plans before the liquidity crisis deepens at once due to a credit rating downgrade.”
In fact, the total amount of Asiana’s borrowings stood at 3.44 trillion won (US$3.03 billion) as of the end of last year. Out of these, the amount of short-term loans it needs to pay within a year is 1.32 trillion won (US$1.16 billion). Financing lease and asset-backed securitization account for most of its debts with 41 percent and 36 percent, respectively. The borrowings from financial institutions take up about 14 percent.
Meanwhile, the KDB, the main creditor of Asiana, is said to be mediating the company’s self-rescue plans to be submitted to the creditors. The company will be able to extend the MOU to be expired later this week and avoid a court receivership or workout only when the self-rescue plans receive approval from the creditors.