Creditors of Asiana Airlines, including the state-run Korea Development Bank (KDB), are expected to provide up to 1 trillion won (US$879.89 million) of financial support to the ailing airline this week. They are likely to use perpetual bond and stand-by loan, which is more like a bank account with overdraft line of credit, to provide the support. In short, Asiana Airlines is expected to receive more funds to accelerate management normalization than the 500 billion won (US$439.95 million) that the firm requested earlier.
The creditors are discussing the amount of financial support before signing a memorandum of understanding (MOU) with Asiana Airlines this week, according to financial industry sources on April 21. They are said to be willing to provide more funds than requested by Asiana Airlines as the airline cannot raise as much funds as it needs in the capital market.
An official from financial authorities said, “We will decide on the ceiling of financial support with the creditors based on Asiana Airlines’ financial state and credit rating in the future. Asiana Airlines’ debts come to about 3 trillion won (US$2.64 billion) now and the creditors are discussing how much they would support depending on how much the company can pay back. They want to make the decision before April 25.” This is because 60 billion won (US$52.79 million) worth of corporate bonds issued by Asiana Airlines will mature on April 25.
The creditors are planning to focus on management normalization to help Asiana Airlines regain the market’s confidence. Asiana Airlines currently has 3.5 trillion won (US$3.08 billion) of debts and the firm needs to pay off 1 trillion won (US$879.89 million) of them within a year. The creditors are considering extending financial support as much as it can pay off the debt that matures this year. However, the fund will not be offered in a lump. The company can use the stand-by loan when a liquidity crisis occurs.
An official from the creditors said, “After the creditors determined that Asiana has problems with its financial structure, former Kumho Asiana Group chairman Park Sam-koo has stepped down from group management and decided to sell Asiana Airlines earlier than expected. Accordingly, the creditors agreed to provide financial support as much as possible to stabilize the company. Since Asiana Airlines is in decent shape now when it comes to stock prices and it has growth potential in the future, the creditors are willing to raise the upper limit of financial support for management normalization.”