Choi Jong-ku, chairman of the Financial Services Commission, said on April 3 that the main reason for Asiana Airlines’ trouble is its corporate governance, stressing the responsibility of Kumho Asiana Group Chairman Park Sam-koo.
It is rare that the head of the FSC, which supervises Korea Development Bank (KDB), the main creditor of Asiana Airlines, directly referred to the corporate governance problem of a particular company.
Market analysts took Choi’s latest comment as intended to put pressure on Park to give up his control of the ailing airliner instead of simply resigning from the chairman’s post, which Choi seemed to view as a mere symbolic gesture.
During a press meeting on April 3, Choi said, “Park had once resigned and returned to the top post in the past. If he does it again, it will be difficult to gain trust from the market. There is a view that the fundamental reason for Asiana’s trouble is its governance problem.” Previously, Choi called for credible measures to normalize Asiana Airlines, but it was the first time for him to directly refer to the company’s governance problem.
Choi’s comment came just two days after Asiana Airlines announced plans to sell off assets, close down non-profitable routes and downsize operations to tide over the liquidity crisis. Choi seems to believe that these measures are not enough to win back investor confidence and that Park needs to make a bold decision to settle the current situation.
To prevent Park’s comeback, it is necessary to force him to sell of his stake in Kumho Bus Lines Co., which is on the top of the group’s corporate governance structure. Park owns a 31.1 percent stake in Kumho Bus Lines, while his son Park Se-chang, president of Asiana IDT, holds a 21 percent stake. Park maintains his control of Kumho Asiana Group, which includes Kumho Industrial and Asiana Airlines, based on his stake in Kumho Bus Lines.
The problem is that 40 percent out of the 52.1 percent stake owned by Park and his son has been offered to KDB, the main creditor, as collateral for loans. Park sold off his 8.14 percent stake in Kumho Tire Co., which was held by the KDB as collateral, to raise funds in the process of acquiring Kumho Industrial in 2015. Instead, he offered the 40 percent stake in Kumho Holdings, current Kumho Bus Lines, held by him and his son as collateral to KDB. China's Doublestar Group took over Kumho Tire in 2017 but the KDB still holds the security right of the stake of Park and his son. An official from KDB said, “With the stake sale, the owner of the company has just been changed from the creditors to Doublestar. We still have the security right of 250 billion won (US$220.34 million) worth of moeny borrowed by Park when he managed Kumho Tire.
There is speculation in the market that Park will use his personal wealth and put up his stake in Kumho Bus Lines as collateral, but it is impossible to provide additional collateral in reality. Park controls the group through Kumho Bus Lines in name only. The creditors actually have the right to sell off the stake offered as collateral. Some analysts say that the creditors are pressuring Park to leave the disposal of his collateralized stake to their discretion so that they can push for normalization of Asiana Airlines in their own way.
A senior official from the financial industry said, “Air Busan and Air Seoul are the most lucrative assets. However, selling off these companies will not help because Asiana Airlines will lose its cash cow. So, what financial authorities and the creditors really want may be to force Park to give up his stake in Kumho Bus Lines currently tied up as collateral.”