Drifting Asiana Airlines Acquisition Battle... The Conclusion is 'Resale'

[Asia Economy Reporter Kangwook Cho] As concerns over a 'no-deal' in the sale of Asiana Airlines grow, the possibility of activating a 'Plan B' involving creditor management followed by resale is increasing. Some even worry that Asiana Airlines might follow the path of Daewoo Shipbuilding & Marine Engineering, which drifted for over 20 years without finding an owner.

According to industry sources on the 8th, Kumho Industrial and HDC Hyundai Development Company are blaming each other for the delay in the Asiana Airlines merger and acquisition (M&A). As a result, there is a high possibility of litigation if the contract falls through.

Separately, the biggest concern is what will happen to Asiana Airlines' future. For now, the Korea Development Bank (KDB) plans to place Asiana Airlines under creditor management if the sale fails. If the creditors, including KDB, convert the 800 billion KRW of perpetual bonds they currently hold into equity, they will acquire a 36.9% stake, becoming the largest shareholder.

However, this is not a 'nationalization' of Asiana Airlines; rather, the plan is to monitor market conditions and proceed with resale. It is strongly suggested that KDB might incorporate Asiana Airlines as an affiliate, similar to the past with Daewoo Shipbuilding & Marine Engineering, undergoing restructuring through 'temporary nationalization' to downsize before putting it back on the market.

However, it is uncertain whether groups such as SK Group, Hanwha Group, and CJ Group, which were mentioned early in the Asiana Airlines acquisition battle, will enter the M&A market. Asiana Airlines had a debt ratio of 6279% as of the first quarter, more than ten times higher than other airlines. The fastest and most effective financial restructuring would be workforce downsizing, but high-intensity restructuring could cause side effects and is also something the government is reluctant to pursue. Currently, rumors of a 2 trillion KRW plus alpha scale support from the Industrial Stabilization Fund are emerging, which is also a burden for companies. At least 10% of the total support amount is acquired as equity-linked securities, which could later serve as a channel for government intervention in corporate management.

Ultimately, the market points out that Asiana Airlines could become a 'money pit' like Daewoo Shipbuilding & Marine Engineering. Daewoo Shipbuilding & Marine Engineering remained government-owned for about 20 years, overcoming several crises through liquidity support. Approximately 10 trillion KRW was provided during this process. Additionally, subsidiaries such as KDB Life Insurance and Daewoo Construction, which KDB must resolve, remain.

A financial sector official said, "It is doubtful whether any company will show interest in Asiana Airlines, which has been left battered through the M&A process," adding, "Although KDB plans to manage and normalize operations, it could end up like Daewoo Shipbuilding & Marine Engineering, sustained by massive taxpayer money."