Hyundai Development, Losing First Trial in 'Asiana 200 Billion Won Deposit Lawsuit', Appeals

Asiana Airlines' wrapped aircraft featuring photos of key members of the national football team such as Son Heung-min, Hwang Hee-chan, Hwang Ui-jo, Kim Min-jae, and Kim Seung-gyu / Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Kim Daehyun] HDC Hyundai Development Company (HDC Hyundai) consortium appealed against the first-instance court ruling that Asiana Airlines, whose M&A (mergers and acquisitions) deal was canceled, does not need to return the performance bond received from the consortium.

According to the court on the 8th, HDC Hyundai submitted an appeal to the Seoul Central District Court Civil Division 16 (Presiding Judge Moon Seonggwan) on the same day.

On the 17th of last month, the first-instance court ruled in favor of the plaintiffs in the pledge extinction claim lawsuit filed by Asiana Airlines and Kumho Construction against HDC Hyundai and Mirae Asset Securities. At that time, the court ordered HDC Hyundai and others to notify the extinction of the pledge (security) on the deposit and to pay 1 billion KRW to Asiana Airlines and 500 million KRW to Kumho Construction.

Earlier, in November 2019, HDC Hyundai formed a consortium with Mirae Asset Daewoo to acquire Asiana Airlines. After being selected as the preferred bidder, they signed a stock purchase agreement (SPA) and paid a performance bond of about 250 billion KRW, which is 10% of the transaction amount.

However, Asiana Airlines judged that HDC Hyundai lacked the intention to acquire and notified the termination of the M&A contract. They also filed a pledge extinction claim lawsuit to forfeit the performance bond. The purpose was to request the release of the pledge so that the amount paid by HDC Hyundai for the acquisition of new and existing shares could be used.

On the other hand, HDC Hyundai argued that the responsibility for the contract failure lies with Asiana Airlines. They claimed that Asiana Airlines refused the requested reassessment due to changes in the business environment caused by the spread of COVID-19 and that there were undisclosed liabilities in the financial statements.

If the lawsuit result is finalized in favor of Asiana Airlines, the contract deposits paid by HDC Hyundai and others will be attributed to Asiana Airlines (217.7 billion KRW) and Kumho Industrial (32.3 billion KRW), respectively.