(2nd LD) Asiana deal collapses, more assistance eyed for survival

(ATTN: UPDATES with reactions from Kumho Industrial and Asiana Airlines in paras 10, 14)
By Choi Kyong-ae

SEOUL, Sept. 11 (Yonhap) -- Creditors of Asiana Airlines Inc. announced Friday that they decided to end a drawn-out deal to sell the country's No. 2 full service airline, as they failed to make a breakthrough in terms with property developer HDC Hyundai Development Co. (HDC).

The state-run Korea Development Bank (KDB), its main creditor, said Kumho Industrial Co., which owns a controlling stake in Asiana Airlines, notified HDC of the deal's termination.

Choi Dae-hyun, executive director handling the issue at KDB, said the deal's collapse was "regrettable."

It has become the country's second botched deal in the airline sector hit hard by the COVID-19 pandemic this year, following Jeju Air Co.'s decision not to acquire smaller rival Eastar Jet Co. in July.

In December, the HDC-led consortium signed the deal to acquire a 30.77 percent stake in Asiana Airlines from Kumho Industrial, a construction unit of Kumho Asiana Group, as well as new Asiana shares to be issued and the carrier's six affiliates, for 2.5 trillion won (US$2.1 billion).

The consortium was scheduled to complete the acquisition by June 27. But in June, it demanded renegotiations with Kumho and the creditors over acquisition terms due to the worsening virus impact on airlines.

Lee Dong-gull, chairman of the main creditor, the Korea Development Bank (KDB), and HDC Chairman Chung Mong-gyu met three times to discuss ways to push the stalled deal forward this year, but they only found a rift running deep between them.

In their third meeting last week, KDB Chairman Lee reportedly suggested a sharp reduction in the acquisition price by 1 trillion won (US$840 million) for Asiana Airlines to reflect the pandemic's impact on the airline industry.

But HDC didn't accept the offer and instead once again demanded another round of due diligence on the carrier, which was already rejected by the creditors and Kumho Industrial.

Kumho Industrial said the deal's collapse could delay its investment plans, but its cash flow and business conditions are unaffected.

With the collapse of the deal, Asiana will be placed under the control of the creditors -- the KDB and the Export-Import Bank of Korea (Eximbank).

On Friday, a state-run fund set up for the country's backbone industries approved a capital injection of 2.4 trillion won into Asiana Airlines to help the carrier stay afloat, according to the KDB.

The KDB and the Eximbank already injected a combined 3.3 trillion won, including 1.7 trillion won this year, into Asiana in the past two years.

Asiana Airlines CEO Han Chang-soo said Asiana is holding close consultations with the creditors to minimize market chaos following the deal's rupture and stabilize the company.

Asiana has suspended most of its flights on international routes since March, dealing a further blow to its bottom line.

Airlines were already hurt by a sharp decline in travel demand on Japanese routes following Japan's export curbs on key industrial materials essential to Korean tech firms amid strained ties over wartime historical issues last year.

Its net losses deepened to 432.88 billion won in the January-June period from 267.4 billion won a year earlier.

kyongae.choi@yna.co.kr
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