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SBW emerges as sole bidder for Eastar Jet acquisition

The fashion company must still compete with the preliminary buyer selected by Eastar Jet in May

By Jun 14, 2021 (Gmt+09:00)

SBW emerges as sole bidder for Eastar Jet acquisition

Korea’s fashion company Ssangbangwool Inc. (SBW) was the only participant in the Eastar Jet Co. sellout bidding held at the Seoul Bankruptcy Court on June 14.

SBW joined the bidding through a consortium headed by its affiliate Kanglim Co., a special vehicle maker. 

Kanglim makes special vehicles, such as those supplied to state-run power company KEPCO. 
Kanglim makes special vehicles, such as those supplied to state-run power company KEPCO. 

Another strong candidate Harim Co., a domestic livestock food company and the owner of the shipping company Pan Ocean Co., did not take part in today’s bidding.

“We will find other ways than the Eastar Jet acquisition to enter the air cargo business,” said a Harim representative. Sources report that Harim’s decision to pull out was largely due to Eastar's heavy debt burden. 

Analysts estimate Eastar’s total debt to be around 255 billion won ($228 million). Of the estimated total, 70 billion ($63 million) are priority claims and the other 185 billion are rehabilitation claims submitted to the court. The exact amount will be determined after another round of due diligence.

The priority claims must be paid in full and include unpaid wages and severance pay. The rehabilitation claims, on the other hand, can be partially written off according to future negotiations in adjusting the company’s debt ratio.

STALKING-HORSE BIDDING

As the bidding is conducted under a stalking-horse process, Kanglim still has to compete with Sung Jung Corp. (SJ), a construction firm selected by Eastar Jet in May as the preliminary buyer.  

A stalking-horse offer is a form of initial bid for a bankrupt firm, which chooses an entity from a pool of bidders that will make the first bid on the firm’s remaining assets, which in this case was won by SJ.

The preliminary buyer SJ currently holds the right to buy Eastar Jet. But if SJ declines to take the price proposed by its competitor, then Kanglim becomes the preferred bidder.

Sources report that SJ in May had proposed the sum of 60 billion to 80 billion won ($54 million to $72 million) to Eastar Jet, while Kanglim this time is reported to have written down more than 100 billion won ($90 million).  

“SJ is likely to pull out if Eastar Jet’s price becomes higher than 100 billion won,” said an investment banking official.

The final decision regarding the selection of the preferred bidder will be announced by the Seoul Bankruptcy Court on June 21.

Insiders say that Eastar Jet is aiming to resume operations of domestic flights from October of this year, as its first move to normalize the business. It will also re-apply for the government’s Air Operator Certificate (AOC), which became ineffective in May 2020.

“As the Korean government is pushing for air travel bubble (ATB) agreements with multiple countries, low-cost carriers like Eastar Jet will benefit,” said an airline industry official.  

The travel bubble refers to allowing free travel within agreed countries by waiving quarantine measures among them.

Following the news that SBW’s Kanglim became the sole participant in the Eastar Jet bidding, SBW’s shares on June 14 rose by 17.71% and closed at 1,070 won ($0.96).

SBW is an established underwear maker in Korea with a presence in other fashion segments. 
SBW is an established underwear maker in Korea with a presence in other fashion segments. 

On the other hand, Harim Co., which against investor expectations did not take part in the bidding, dropped by 20.07% in a single trading day to 3,545 won ($3.17).

Write to Ji-hye Min and Jong-woo Kim at spop@hankyung.com

Daniel Cho edited this article.

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