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| Finance Minister Hong Nam-ki, second from right, speaks at an economy-related meeting in the government complex in Seoul, Tuesday. Yonhap |
By Park Hyong-ki
The government has decided to inject 1.6 trillion won ($1.4 billion) into Asiana Airlines to provide a lifeline to the debt-ridden company, Finance Minister Hong Nam-ki said Tuesday.
"Creditors led by the state-run Korea Development Bank (KDB) will help increase the company's capital base and resolve its liquidity problem," Hong said in an economy-related meeting in Seoul.
"They will also seek to normalize the airline by closing down unprofitable routes and selling the company within this year."
Despite the government's decision, Asiana Airlines shares fell Tuesday, closing down 490 won, or 5.97 percent, at 7,720 won.
The KDB-led creditors will purchase Asiana's bonds worth 500 billion won and extend a line of credit worth 800 billion won to the company. Additionally, they will set aside 300 billion won to help improve the airline's finances, Hong added.
This would be enough to cover Asiana's 60 billion won debt due this week, and short-term obligations worth over 1 trillion won this year.
The company's total debt amounts to about 3.5 trillion won, according to its financial statements.
"The sale by creditors is expected to reduce Asiana's liquidity risks. Conglomerates with huge cash reserves will emerge as potential bidders," said Choi Go-woon, an analyst at Korea Investment & Securities.
Hong did not mention the exact timing for the Asiana auction, or whether the sale will include the company's budget airline subsidiaries including Air Busan.
However, the KDB said it has signed an agreement with Kumho Group under which Kumho Business and Kumho Industrial will hand over Asiana so creditors can sell the airline by December.
The policy bank added in a press statement that it has extended bridge loans worth 130 billion won to Kumho Business, backed by Kumho Business' 45.42 percent stake in Kumho Industrial as collateral.
Kumho Industrial owns a 33.47 percent stake in Asiana Airlines.
Former Kumho Chairman Park Sam-koo and his family hold a 71.2 percent stake in Kumho Business, formerly Kumho Holdings, according to Kumho Business' audit filing.
Kumho Petrochemical is Asiana's second-biggest shareholder with an 11.98 percent stake, following Kumho Industrial.
Kumho Petrochemical said it was not interested in buying Asiana.
This comes amid speculation that Park Sam-koo could ask his brother Chan-koo, the chief executive of Kumho Petrochemical, to increase Kumho Petrochemical's ownership in the airliner.
Park also said although it hurts to lose Asiana, he is going to let it go for the future of the company.
"We will soon have an adviser for the auction," a Kumho Industrial spokesman said.
KDB Chairman Lee Dong-gull said the creditors would want to pursue "a package deal," selling Asiana as well as its budget airlines to a "responsible buyer."
Early this month, the KDB-led creditors and the Financial Services Commission (FSC) approved Asiana's revised self-rescue proposal after Park agreed to resign and sell the company.
The FSC has said it will help save Asiana, but only under new leadership without Park.
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