[Courtesy of Korean Air]
South Korea's top flag carrier Korean Air vowed Thursday to issue some 300 million US dollars worth of contingent convertible (CoCo) bonds after its board agreed on a fresh injection of money into the airliner's embattled sister firm, Hanjin Shipping.
The CoCo bonds will have a maturity of 30 years, Korean Air said in a regulatory filing, adding an interest rate and other details would be disclosed later. CoCo is a fixed-income instrument that is convertible into equity if a pre-specified trigger event occurs.
Korean Air, a key unit of the family-run group controlled by Cho Yang-ho, has seen its financial woes aggravated by a continued injection of liquidity into Hanjin Shipping which was put under court receivership on August 31.
Under pressure, the group vowed to inject some 100 billion won (90.6 million US dollars) into Hanjin Shipping after government officials suggested a low-interest loan would be provided if Hanjin units provide collateral.
Cho has secured a bank loan of 40 billion won to ease a liquidity crisis that has disrupted cargo delivery by Hanjin vessels with the rest coming from Korean Air, the shipper's largest shareholder.
In a decision late Wednesday, Korean Air's board of directors agreed to provide 60 billion won that will be injected based on accounts receivable. Yonhap News reported that the state-run Korea Development Bank is considering loaning some 50 billion won to help Hanjin unload its cargo.
Like other tycoons who control their family-run conglomerates through a complex web of cross-shareholdings, the Cho family controls 29.8 percent in Hanjin KAL which has 31.46 percent in Korean Air.
Market analysts said Korean Air could reduce its debt and boost its corporate value by severing its financial link with the shipping unit. Korea Air's debt ratio stood at 1,082 percent at the end of June.
Aju News Lim Chang-won = cwlim34@ajunews.com
reporter
Park Sae-jin
swatchsjp@ajunews.com
