Eastar Jet, Concerns Become Reality... Will Low Bond Repayment Rate Hold Back Progress?

[Asia Economy Reporter Dongwoo Lee] Eastar Jet, which is undergoing rehabilitation proceedings, is facing a red light in its business normalization as negotiations on the repayment rate with some creditor lessors are delayed. This is because the aircraft lessors are claiming repayment amounts including costs incurred during the non-operating period.

According to the aviation industry on the 26th, Seong Jeong-eun recently indicated the possibility of reconsideration by saying, "The lessors are making unreasonable demands. We are considering (the acquisition)," as negotiations on the repayment rate between Eastar Jet and the creditors were delayed. This is the first time that Seong Jeong-eun, the prospective acquirer of Eastar Jet, has directly mentioned the creditor negotiation issues ahead of the creditors' meeting.

The reason for the delay in Eastar Jet's repayment rate negotiations is that the lessors are claiming repayment costs amounting to several billion won beyond the scope of the original rehabilitation plan.

It is known that Eastar Jet's lessors are demanding that Seong Jeong-eun additionally pay for the rehabilitation claims and costs incurred from the start of the rehabilitation proceedings until the return of Boeing 737 Max aircraft. Eastar Jet's monthly lease fee for the Max aircraft is about 800 million won on average, and if Seong Jeong-eun agrees to the lessors' demands, an additional cost of approximately 8 billion won beyond the rehabilitation claims must be borne.

Previously, Seong Jeong-eun allocated 15.8 billion won out of 108.7 billion won of acquisition funds for Eastar Jet to the repayment of rehabilitation claims. The repayment rate for rehabilitation claims is 3.68%. 5.9 billion won was allocated for the repayment of confirmed rehabilitation claims of 160 billion won, and 9.8 billion won was allocated for the repayment of unconfirmed claims of 260 billion won, including those of lessors.

In the industry, as Eastar Jet finds it difficult to negotiate with creditors due to the low repayment rate, there is an analysis that it may be difficult to obtain the two-thirds consent of creditors required for rehabilitation approval at the creditors' meeting next month.

An Eastar Jet official said, "Currently, we cannot be 100% confident of obtaining creditor consent at the creditors' meeting," and added, "We will do our best to negotiate the repayment amount until the very end."