Deadline for negotiations on Asiana's sale to HDC extended

Lim Chang-won Reporter() | Posted : December 12, 2019, 16:33 | Updated : December 12, 2019, 16:33

[Yonhap Photo]

SEOUL -- The deadline for negotiations on the acquisition of South Korea's second-largest flag carrier, Asiana Airlines, was extended due to unresolved differences mainly over the value of old shares and contingent debts.

A consortium led by HDC Hyundai Development, a comprehensive construction company, was selected as the preferred bidder on November 12 to acquire a 31-percent stake in Asiana and its affiliates including two low-cost carriers, Air Seoul and Air Busan. Negotiations were to be completed on December 12.

However, the deadline for negotiations was extended to the fourth week of December, according to aviation and investment banking industry sources. HDC and Kumho have failed to narrow differences over price and other issues. HDC has offered about 320 billion won ($269 million) for Asiana's old shares, while Kumho Industrial, the holding company of the debt-stricken Kumho Asiana group, wants more.

HDC insists that the limit on damages caused by contingent debts should be specified, citing a possible fine to be imposed by the Fair Trade Commission, a state anti-trust watchdog. Asiana is under investigation on charges of illegally supporting affiliates in connection with an unexpected shortage of in-flight meals in 2018 that triggered allegations about unfair practices by the ruling family.

"As Asiana Airlines presented the price of old shares too high, HDC seems to be looking for a price adjustment effect by setting the compensation limit high," a financial industry official said, adding Kumho demands that Asiana's subsidiaries maintain a three-year mandatory contract on the supply of certain services and goods to Asiana. Workers at Asiana, affiliates and subcontractors have called for job security.

HDC Group Chairman Chung Mong-gyu said earlier that the acquisition of new shares is expected to be worth more than two trillion won, which will significantly improve Asiana's financial health and lower its debt ratio below 300 percent from 660 percent.

Kumho has offered to sell its airline business under an agreement with Korea Development Bank, a state policy bank. Due to currency-related losses and increased jet fuel costs, Asiana swung to a net loss of 10.4 billion won in 2018 from a net profit of 248 billion won a year ago. In the first half of this year, Asiana's net loss widened to 292 billion won from 43 billion won a year earlier.

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