Asiana Airlines and its subsidiary Air Busan were put on alert as HDC Hyundai Development put off the acquisition of the two companied indefinitely are taking steps to increase capital.
Asiana Airlines will hold an extraordinary shareholders' meeting on June 15 to propose an agenda for revising the total number of shares issued and a limit for the issuance of convertible bonds (CBs), said sources in the airline industry on May 7. Through this temporary shareholders' meeting, Asiana Airlines is expected to increase the total number of shares issued and the limit for the issuance of convertible bonds (CBs).
In the midst of the deterioration of management and a sharp decline in aviation demand due to the spread of the novel coronavirus, HDC Hyundai Development is delaying the acquisition, and Asiana Airlines is urgently needed to improve its financial conditions. Given tough market conditions, the financial conditions of Asiana Airlines and its subsidiaries Air Busan and Air Seoul are likely to deteriorate in 2020.
At the end of 2019, Asiana Airlines' capital impairment rate was 19 percent based on consolidated financial statements. The financial conditions of its subsidiaries such as Air Busan and Air Seoul are also a point to ponder. As of the end of 2019, Air Busan's capital impairment rate was 52 percent, and the capital of Air Seoul was already impaired. In the securities market, companies with capital impairment rates exceeding 50 percent are designated as stocks under supervision.
Although HDC Hyundai Development clarifies its position that it will not give up acquiring Asiana Airlines, but it is true that the acquisition is weighing on HDC Hyundai Development more. Therefore, some airline industry insiders say that Asiana Airlines started to prepare self-help measures by raising capital.
As Asiana Airlines’ deteriorating financial conditions have given HDC Hyundai Development more adventages in acquisition negotiations, the future acquisition process will be up to HDC Hyundai Development. HDC Hyundai Development has reportedly requested Asiana Airlines’ main creditor banks, Korea Development Bank and Export-Import Bank, to extend the deadline of loan repayment and cut interest rates.