[Asia Economy Reporter Yoo Je-hoon] As the deadline for Jeju Air's acquisition and merger (M&A) of Eastar Jet, which has hit turbulence, approaches in 6 days (on the 15th), both parties are becoming increasingly active. While the possibility of a last-minute agreement cannot be completely ruled out, industry insiders interpret this series of developments as 'building a case' in preparation for a blame game if the M&A falls through.
According to the aviation industry on the 9th, Eastar Jet is currently in contact with various stakeholders such as leasing companies, ground handling companies, workers, and authorities to resolve unpaid debts, one of the biggest obstacles to the M&A. Eastar Jet recently sent official letters to ground handling companies and partners requesting a reduction and deferral of unpaid amounts, and reportedly requested lease fee reductions from leasing companies considering the suspension of operations due to COVID-19. Additionally, Eastar Jet is said to be seeking workers' consent to return part of the unpaid wages amounting to 26 billion KRW. An Eastar Jet official stated, "Since last week, the M&A process has dramatically worsened, increasing workers' anxiety."
The total amount of unpaid debts currently held by Eastar Jet reaches 170 billion KRW. Jeju Air previously issued a final ultimatum to resolve unpaid debts of 80 to 100 billion KRW incurred after signing the Stock Purchase Agreement (SPA).
However, despite these efforts, the industry evaluates that the possibility of the M&A falling through is not low. In particular, some view the recent developments as being conscious of a blame game after the M&A fails. If the M&A ultimately collapses, legal battles over deposits and other issues will be inevitable, leading each side to build their case.
In fact, on the 7th, Jeju Air issued a statement sending a final ultimatum to resolve preconditions within 10 business days, saying, "Various allegations recently causing social controversy regarding Eastar raise serious concerns about the legitimacy of the shares Jeju Air intends to purchase in this acquisition," and added, "There is no choice but to question whether stable management can be maintained following the acquisition of these shares."
Eastar Jet is also pushing for a reduction in unpaid debts but the possibility of complete resolution is low. A ground handling company official said, "The government may provide support such as reductions on the premise that the M&A is finalized, but it is doubtful whether private operators like ground handling and partner companies or leasing companies mainly composed of foreign firms will accept requests for reductions and deferrals," adding, "Isn't this conscious of the upcoming blame game?"
Some also analyze that since the aviation authorities are continuing mediation behind the scenes and both sides will have no choice but to accept options like 'responsibility' and 'bankruptcy' if the deal fails, the possibility of a dramatic last-minute agreement cannot be ruled out. An industry official said, "With the M&A on the brink of collapse and everyone unsettled, both sides may use the current situation to reach a dramatic compromise at the last moment."
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