To Keep Asiana Afloat until Acquisition by HDC
Korea Development Bank and the Export-Import Bank of Korea decided on April 21 to provide a 1.7 trillion won loan for Asiana Airlines.
Creditors already provided 1.6 trillion won for the airline in April last year and the airline’s borrowings from the market that must be repaid within this year total 2.5 trillion won. The airline’s monthly fixed cost is approximately 200 billion won.
According to the creditors, the two banks’ decision is expected to enable the airline to maintain its financial soundness until the acquisition by HDC Hyundai Development Company. The two banks are planning to provide liquidity for Korean Air, too.
The banks’ decision is because of the dire situation of Asiana Airlines, which is currently incapable of paying wages. In addition, it is to smoothly complete the acquisition with HDC mulling over the acquisition. Asiana Airlines has conducted a no-pay leave of absence since February this year. Its executives have returned 30 percent to 100 percent of their wages since that month.
In the meantime, the airline’s financing in the market is becoming increasingly difficult. Asset-backed securities worth 410 billion won mature this year and early redemption is around the corner with Korea Ratings having recently lowered the rating of Asiana Airlines’ ABS from BBB+ to BBB. ABS with a credit rating of lower than BBB- are subject to early redemption. Besides, HDC may give up on the airline to make the situation even worse. In that case, the banks will have to pour more money into the airline.
What matters now is how HDC will move. Earlier, HDC was planning to repay 1.17 trillion won by taking part in Asiana Airlines’ 1.5 trillion won paid-in capital increase scheduled for April 7. However, the capital increase has been indefinitely postponed. According to market insiders, HDC is likely to request a change in terms in spite of the banks’ decision.