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Asiana deal set to collapse on discord among contractors

All News 15:44 August 06, 2020

SEOUL, Aug. 6 (Yonhap) -- HDC Hyundai Development Co. on Thursday renewed its demand for another round of due diligence on Asiana Airlines Inc., a dispute that could lead to the collapse of a 2.5 trillion-won (US$2.2 billion) acquisition deal.

HDC said it is still committed to taking over Asiana but "expressed deep regret" toward Asiana Airlines' parent company Kumho Industrial Co. for distorting the case for a new round of due diligence on the debt-laden carrier.

HDC has pressed for 12-week-long due diligence on Asiana Airlines, beginning in mid-August, to further look into the carrier's current financial status in order to complete the deal.

The major property developer has already completed seven weeks of due diligence on Asiana Airlines, but it claimed that Asiana Airlines provided "very limited" documents.

The move came two days after Asiana's main creditor Korea Development Bank rejected HDC's previous request for a new round of due diligence, calling the demand an excessive one that goes way beyond ordinary procedures in an M&A deal.

On Monday, KDB Chairman Lee Dong-gull pressed HDC to determine whether it will proceed with the deal, warning that HDC will be to blame for the looming collapse of the deal.

The dispute could lead to the collapse of the acquisition deal.

This file photo shows HDC's company logo and Asiana Airlines' planes at a local airport. (Yonhap)

In December, the HDC-Mirae Asset Daewoo consortium signed a deal to acquire a 30.77 percent stake in Asiana Airlines from Kumho Industrial Co., a construction unit of the airline-to-chemical conglomerate, new Asiana shares to be issued, and the airline's six affiliates for 2.5 trillion won, with a plan to complete the acquisition by June 27.

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

But the new coronavirus outbreak emerged as a major stumbling block to the deal, as airlines have suspended most of their flights and their earnings were hit hard by the virus.

In early June, HDC called for renegotiations with Asiana's creditors over the acquisition terms, describing the ongoing virus crisis as a "never expected and very negative factor" that will affect the takeover plan.

HDC also named Asiana's snowballing debts as another reason for the renegotiation that is "damaging the acquisition value of the carrier."

Asiana's debts have increased by 4.5 trillion won since July last year, and its debt-to-equity ratio skyrocketed by 16,126 percent at the end of March from end-July.

HDC said Thursday it is still committed to taking over Asiana.

In its latest self-help plans, 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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