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APRIL 2019

Week 15

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Asiana creditor may want new shareholder

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April 12th 2019

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State-owned creditor KDB has rejected the airline’s restructuring plan. Read More »

There are growing prospects of a new shareholder for Asiana Airlines after creditor Korea Development Bank rejected Asiana management’s restructuring plan.

In the lead up to Asiana submitting its plan, it was discussed KDB wanted Asiana shareholders Kumho and Park to exit the airline to pave way for a new shareholder and management group. KDB stated this firmly when rejecting Asiana’s plan. KDB said the proposed plan was inadequate and did not include the possibility Asiana receive a new shareholder and management.

Asiana’s plan was said to be impractical, offering vague commitments but requesting 500 billion won (US$$438m). The cash was said to be too low to substantially reduce Asiana’s debt, let alone be working capital to first replace Asiana’s ageing fleet and second expand the airline to position Asiana as more of a long-haul operator.

The strategic direction was thought to be effective lip service and not worth the requested cash.

Asiana management said former Chairman Park would not re-join the company, as he did earlier this decade after his first resignation. But his son would remain at affiliated companies, making him a partial proxy.

Management said there would be unspecified productivity increases, asset sales and closure of routes. If this did not produce results within three years, Kumho and Park would sell their stakes, initially offering them as collateral. But this clause was said to be crafted in a way that would make it unlikely to ever be actioned. Observers wondered if the generous three year period for evaluation would later be reduced so management could be free of creditor oversight earlier.

The size of investment needed, and ownership and control laws, means possible bidders are mostly large chaebols. A number of them, as well as private equity, are said to have expressed interest in Asiana.

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