HDC Calling for Financial Support for Acquisition of Asiana Airlines

HDC Hyundai Development Co. recently requested the Export-Import Bank of Korea and Korea Development Bank (KDB) to provide financial support in relation to its acquisition of Asiana Airlines.

HDC wants KDB to convert the 500 billion won worth of Asiana's perpetual bonds the bank has acquired into loans or to reschedule repayment of borrowing from creditor banks.

Last year, the two banks provided a total of 1.6 trillion won for the airline, which is divided into the underwriting of the perpetual bonds, loans worth 800 billion won and standby letters of credit worth 300 billion won.

KDB is maintaining a neutral position as the airline’s financial structure is continuing to deteriorate. Specifically, the airline’s debt ratio soared from 649.3 percent to 1,386.7 percent last year, when it posted an operating loss of 443.7 billion won and a net loss of 817.9 billion won. Besides, its short-term borrowings have increased to 2,080.7 billion won and it must repay 473.6 billion won within this year. A speculative-grade credit rating is looming large as the financial structure is continuing to worsen.

In the meantime, the Korea Fair Trade Commission announced on April 3 that it unconditionally approved the business combination between HDC and the airline. “The main field of business of the former is construction and that of the latter is air transport and, as such, the business combination is unlikely to result in limited market competition,” the commission explained, adding, “Although both are running duty-free shops, their specific fields are different and their low market shares are not enough to cause any limited market competition.” At present, the competition authorities of the United States, China, Russia and Kazakhstan are looking into the case.