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All options, including nationalization, on table for Asiana: regulator

All News 15:59 July 28, 2020

SEOUL, July 28 (Yonhap) -- South Korea's financial regulator said Tuesday that all viable options are on the table to deal with Asiana Airlines Inc. as the sale of the country's No. 2 carrier is teetering on the brink of falling through.

An HDC Hyundai Development Co.-led consortium has been seeking to take over Asiana Airlines, but in the wake of the coronavirus pandemic, the deal runs the risk of collapsing.

HDC sent a letter on Sunday to Kumho Industrial Co., which owns a 30.77 percent stake in Asiana Airlines, to demand another round of due diligence on the carrier.

The request is aimed at reviewing the acquisition terms amid worsening business environments due to the COVID-19 pandemic, HDC claimed, but market players speculate that the demand is a step to withdraw from the deal.

Sohn Byung-doo, vice chairman of the Financial Services Commission (FSC), said in a meeting with reporters that "consultations among related institutions are going on with all options on the table," when asked about the possibility of Asiana Airlines becoming a state-owned company in case of the deal's collapse.

This photo taken on July 28, 2020, and provided by the Financial Services Commission (FSC) shows FSC Vice Chairman Sohn Byung-doo speaking at a financial risk management meeting in central Seoul. (PHOTO NOT FOR SALE) (Yonhap)

On Tuesday, Asiana Airlines jumped 21 percent to 4,295 won on the news, far outperforming the broader KOSPI's 1.8 percent gain. HDC fell 0.7 percent to 21,800 won.

One month earlier, property developer HDC called for renegotiations with Asiana creditors over the acquisition terms, describing the ongoing virus crisis as a "never expected and very negative factor" that will affect its planned takeover of the debt-ridden carrier.

HDC then cited Asiana's snowballing debts as another reason for renegotiations, noting that debts are "damaging the acquisition value of the carrier." Asiana's debts jumped by 4.5 trillion won from July last year to March this year.

As for the possibility of the deal's collapse, HDC said on Monday that it "remains committed to acquiring Asiana in order to help strengthen the competitiveness of the local airline industry."

In response, Asiana said it has made all-out efforts to help complete the M&A deal and will continue to carry out what is necessary to finalize the deal.

Kumho Industrial on July 14 sent a letter demanding that HDC complete the deal by the end of August. HDC didn't confirm the notification.

The tit-for-tat between the two sides comes amid reports that Kumho Industrial could notify HDC of the deal's termination and that Asiana has formed a task force team in case of the deal's collapse.

Kumho Industrial and Asiana called the reports "groundless."

HDC's company logo and Asiana Airlines' planes at an airport in South Korea (Yonhap)

In December, the HDC-Mirae Asset Daewoo consortium signed the deal to acquire the carrier from Kumho Industrial, a construction unit of Kumho Asiana Group, as well as new Asiana shares to be issued and Asiana's six affiliates, for 2.5 trillion won (US$2.2 billion), with a plan to complete the acquisition by June 27.

HDC has obtained all necessary approval from regulators in the United States, China, Kazakhstan, Uzbekistan, Turkey, Russia and South Korea.

But the biggest stumbling block to the deal for now appears to be the pandemic's growing impact on the airline industry.

Asiana has been hit hard by the pandemic. It has suspended most of its flights on international routes as more than 180 countries have strengthened entry restrictions amid virus fears this year.

Asiana's net losses for the January-March quarter deepened to 683.26 billion won from 89.18 billion won a year earlier. It is widely expected to report widened losses for the second quarter next month.

To help Asiana stay afloat, the state-run Korea Development Bank and the Export-Import Bank of Korea plan to inject a combined 1.7 trillion won into Asiana. Last year, the creditor banks already extended a total of 1.6 trillion won to the carrier.

In its self-help measures, Asiana has had all of its 10,500 employees take unpaid leave for 15 days a month since April until business circumstances normalize. Asiana's executives have also agreed to forgo 60 percent of their wages, though no specific time frame was given for how long the pay cuts will remain in effect.


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