June 9, 2020 / 1:44 AM / 23 days ago

Hyundai Development wants to renegotiate Asiana Airlines acquisition after debt jumps

SEOUL (Reuters) - South Korea’s Hyundai Development Co (294870.KS) said on Tuesday it wants new terms for its acquisition of Asiana Airlines (020560.KS) after the carrier’s already hefty debt burden increased by some $3.8 billion.

It also called on Asiana’s state-funded creditors to provide support to the long-troubled airline, which must now also contend with the coronavirus pandemic’s crippling impact on travel demand.

Hyundai Development and brokerage Mirae Asset Daewoo (006800.KS) agreed in December to purchase control of South Korea’s No. 2 airline for about 2.5 trillion won ($2.1 billion).

Asiana has recognised an additional 2.8 trillion won of debt as of end-2019 and borrowed another 1.7 trillion won, Hyundai Development said.

That unexpected increase, the airline’s failure to discuss the situation before incurring more debt and its support of unsound affiliates meant a renegotiation was warranted, the developer added.

Asiana declined to comment. Korea Development Bank, its lead creditor, did not have immediate comment.

The airline had total debt of 13.2 trillion won as of end-March.

Hyundai Development, which is keen to seek new growth and has a duty free business, stressed it wanted to proceed with the acquisition and that the developer’s own survival hinged on getting a good deal done.

But even if it decides to walk away, Asiana’s creditors would likely keep the airline afloat, said Choi Go-woon, analyst at Korea Investment & Securities.

“If the deal fails, Asiana would likely be adrift for 1-3 years before it finds a new owner and Korea Development Bank will have to take the lead in restructuring,” he said.

Last year, Asiana’s biggest shareholder, Kumho Industrial, put its 31% stake up for sale. The move came after auditors declined to sign off on Asiana’s 2018 financial statements, triggering a sharp earnings revision and the resignation of its parent company’s chairman.

The airline, which employs roughly 10,000 people, has seen its market value tumble by a fifth to around $800 million since December, hit by the pandemic and delays to the deal. Its shares rose 2.9% on Tuesday on hopes of more support from creditors.

Hyundai Development saw its shares surge 6.1% on hopes for better terms.

Reporting by Joyce Lee and Hyunjoo Jin; Editing by Gerry Doyle and Edwina Gibbs

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