Eastar to file for court receivership this month

SEOUL, Jan. 13 (Yonhap) -- Financially troubled budget carrier Eastar Jet said Wednesday it plans to file for court receivership this month to find a new investor amid the COVID-19 pandemic.

Eastar Jet has had difficulties in finding a strategic investor since July when Jeju Air Co. scrapped its plan to acquire the low-cost carrier.

In the same month, Eastar's creditor banks withdrew their plan to extend loans to Jeju Air to help it take over Eastar.

"Eastar aims to find a new investor through a court-led rehabilitation scheme," an Eastar official said over the phone.

Court receivership is one step short of bankruptcy in South Korea. If a filing is made, a court will decide whether and how to revive the company.

In March last year, Jeju Air signed a deal to acquire the majority stake in Eastar from Eastar Holdings for 54.5 billion won as part of its expansion strategy despite the pandemic.

On July 1, Jeju Air sent an ultimatum demanding Eastar Jet pay off all of its debts, estimated at up to 170 billion won, including unpaid wages to its employees, delayed payments to subcontractors and office operating expenses, by July 15.

But Eastar failed to meet the demands. The company said the debt payment was not part of the deal and that it was not Eastar's duty to do so but Jeju Air's.

On July 23, its creditors -- the state-run Korea Development Bank (KDB) and the Export-Import Bank of Korea -- said they will withdraw their plan to extend loans worth 170 billion won to Jeju Air following the deal's collapse.

Eastar currently has 18 planes, including two 737 MAX aircraft, and had 1,680 employees as of March.

kyongae.choi@yna.co.kr
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