Asiana deal botched as HDC rejects creditors’ latest offer

HDC Hyundai Development Co.’s planned takeover of Asiana Airlines Inc. has fallen through as the preferred buyer renewed its request for further due diligence on the beleaguered airliner after refusing to accept creditors’ latest proposal to cut acquisition prices.

South Korea's state-run Korea Development Bank (KDB), the carrier’s main creditor, has declared the deal collapsed and said it would inform HDC early next week of its decision to end talks, according to a KDB official.

“We believe HDC has no intention to acquire Asiana after all. We’ll end talks and immediately embark on Plan B.”

Creditors, which also include the Export-Import Bank of Korea, will now put Asiana under their management, provide financial support from state funds, and then seek another buyer later, sources said.

Asiana and its creditors are expected to seek as much as 2 trillion won in aid from the 40-trillion won state fund established to assist key industries in riding out the coronavirus-initiated economic slowdown.



The collapse of the deal came after HDC sent creditors an email on September 2, reiterating that it wants another 12-week round of due diligence to ascertain the debt-ridden carrier’s financial status – a request already rejected by KDB and other creditor banks.

KDB Chairman Lee Dong-gull and HDC Chairman Chung Mong-gyu met last week to narrow differences over acquisition terms and push forward the stalled deal amid the coronavirus outbreak. During the meeting, creditors presented proposals to ease HDC’s financial burden in taking over Asiana, including fresh loans and a cut in the acquisition price by as much as 1 trillion won.

DEAL BOTCHED BY PANDEMIC

In December, the HDC-led consortium signed a deal to acquire a 30.77 percent stake in Asiana Airlines from Kumho Industrial Co., a construction unit of Kumho Asiana Group, for 2.5 trillion won (US$2.2 billion). The deal was meant to be completed by June, but was delayed due to the coronavirus pandemic.

The airline’s snowballing debt also blocked negotiations from proceeding. In April HDC discovered that Asiana’s debt jumped by 4.5 trillion won from July of last year to March of this year, and its debt-to-equity ratio skyrocketed by more than 15,000% during the same period.

Asiana has suspended most of its international flights as more than 180 countries have strengthened entry restrictions amid virus fears this year.

From January to June, the carrier’s net losses deepened to 432.9 billion won from 267.4 billion won in the same period last year.

By Kyung-Min Kang and Sang-eun Lucia Lee

Kkm1026@hankyung.com, selee@hankyung.com