KDB, KEXIM to Provide 1.7 Tril. Won to Asiana
As Asiana Airlines has agreed to the terms and conditions of additional support from creditors such as Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM), HDC Hyundai Development is expected to expedite its acquisition of the troubled airline.
On April 22, Asiana Airlines decided to accept the creditors' funding plan and raised its debt limit. KDB and KEXIM decided on April 21 to establish a credit line (CL) of 1,229.3 billion won and 480.7 billion won, respectively, for Asiana to keep it afloat.
The two creditors already provided 1.6 trillion won to Asiana Airlines in April 2019. Their latest decision is designed to help Asiana Airlines ride out its liquidity crisis. The company is in a serious financial crisis as it must repay 2.5 trillion won debt this year and cover fixed costs of 200 billion won to 300 billion won per month.
The problem is that HDC Hyundai Development's acquisition of Asiana Airlines is slow-paced. Until recently, HDC appeared to be approaching the final stage as five countries, including China and the United States, have approved its takeover of Asiana Airlines. However, HDC has virtually halted the acquisition process by delaying a capital increase plan and the repayment of borrowings from KDB and KEXIM. HDC’s move was prompted by the COVID-19 outbreak, which pushed the aviation industry into an unprecedented crisis. HDC thought that even if it invested in Asiana Airlines as planned, the airline looked unlikely to overcome its liquidity crisis. Asiana Airlines' debt-to-equity ratio increased significantly from the end of 2019, and the amount of borrowings to be repaid to the creditors inflated from 1.7 trillion won.
However, the creditors have decided to provide additional support to Asiana Airlines and are reportedly considering turning Asiana’s permanent bonds they hold into equity, putting pressure on HDC to accelerate the acquisition process. Yet experts predict that HDC may demand that its acquisition terms be change. But in this case, HDC will not be free from blame for leaving Asiana Airlines in a worsening situation.