Kumho Buslines Unable to Repay Loans from KDB
Kumho Engineering and Construction, which is the parent company of Asiana Airlines, is facing a crisis with the sale of the airline postponed and Kumho Buslines, the holding company of Kumho Group, having to repay 130 billion won to Korea Development Bank on April 25.
The money was borrowed last year based on the decision to sell the airline and 44.99 percent of Kumho Engineering and Construction shares are currently held as security. Korea Development Bank used the security right as a kind of safety catch in the process of the sale to force the management of the group to keep its promise.
The thing is, Kumho Buslines is in no position to repay the money. Its financing requests are likely to be turned down in that the company’s assets worth no less than 1,227.5 billion won were held as security as of the end of last year and this is equivalent to 92 percent of its tangible assets (745.8 billion won) and investment assets (590.9 billion won) that can be used as security. The company’s net loss amounted to 79.2 billion won last year and its cash on hand is no more than 76 billion won.
Besides, the disposal of Asiana Airlines, which was expected to function as substantial financial resources, has come to a halt. HDC Hyundai Development Company indefinitely postponed the 1,174.5 billion won paid-in capital increase scheduled for April 7 along with the finalization of the contract. Under the circumstances, Kumho Group is likely to fail to repay the money and Korea Development Bank may take control of the group without maturity extension.
Much attention is being paid to what conclusion the bank will reach. Some point out that the bank will become the largest shareholder in Kumho Buslines and sign a new contract with HDC in that business normalization will not be easy in spite of the 2.2 trillion won paid-in capital increase promised by HDC with the airline’s capital impaired in part.