Mirae Asset Daewoo, which is partnering with HDC Hyundai Development Company in its consortium for acquiring Asiana Airlines, has refuted the rumor that HDC may give up on the takeover.
The rumor is based on Mirae’s recent aggressive investments. Last year, the company signed a contract with China’s Anbang Insurance Group to purchase 15 hotels in the United States by investing seven trillion won. However, its financing for the purpose is not going well due to the spread of COVID-19. Besides, it is having a hard time selling the Tour Majunga in France, in which it already invested more than one trillion won. Furthermore, it is facing a margin call of approximately one trillion won in relation to overseas futures. Mirae is supposed to prepare 489.9 billion won for the takeover and rumors circulated that the company, while having a hard time preparing the money, called for HDC to give up on the acquisition.
However, Mirae said on April 7 that it would not withdraw due to financing difficulties. “We already prepared funds in relation to the airline’s capital increase scheduled for this month and our contract with HDC guarantees both principal and interest when it comes to our investment in the airline,” it explained, adding, “We have no reason to give up on the low-risk deal and it is HDC as a strategic investor that has to make a decision on continuation through negotiations with Korea Development Bank.”
Mirae’s financial burden is not heavy in fact. Despite the pandemic, the company posted a profit in the first quarter of this year. It is planning to dispel worries by announcing its earnings earlier than scheduled. Still, Mirae cannot be at ease. The airline’s losses are soaring this year and Mirae’s disinvestment may be affected if the losses affect HDC.
The thing is, it is difficult to predict how the pandemic will affect the aviation industry down the road. “We prepared various figures and estimates in examining the acquisition, but those are completely meaningless now,” Mirae said, adding, “Even if the coronavirus subsides this year, no one can predict when the aviation and tourism sectors will recover.”
Another variable is the South Korean government’s assistance to be provided for local airlines. The financial authorities already reached a consensus that any type of assistance is necessary for every airline with the aviation industry about to collapse. However, the government would have to face a huge financial burden if the consortium gave up on the airline in the end.