The development will alleviate short term liquidity problems for the airlines. Long term issues however will need to be dealt with. Asiana has taken on considerable debt.
On Tuesday, South Korea’s finance minister Hong Nam-ki stated, South Korean creditors plan on providing $1.40 billion (1.6 trillion won) in financial support to debt-laden Asiana Airlines Inc.
The move will alleviate liquidity problems following a bruising month.
The development comes in the wake of Asiana Airlines’ biggest shareholder stating earlier this month that it would sell its entire stake in Asiana Airlines Inc, worth 564 billion won in response to creditors’ rejection of an earlier request for support of 500 billion won.
For now, the airlines’ creditors have offered to buy Asiana Airlines’ perpetual bonds worth 500 billion won and have set a credit limit of 800 billion won, among other conditions, said Hong Nam-ki.
He went on to add, creditors have also demanded that Asiana’s top shareholder Kumho Industrial Co Ltd sell its stake in the airlines within 2019.
According to a spokesman for the parent group of Asiana, it will “do its utmost” to sell Asiana Airlines, adding that it expects to sign a preliminary deal with creditors later today.
Ever since the price of crude oil starting its upward march 6 months ago, shares of Asiana Airlines and budget affiliate Air Busan Co Ltd, have started falling.
On Tuesday, shares of Asiana Airlines fell by 4.6% while Air Busan’s shares fell by 5.8%.
Earlier this year in March, auditors had raised concerns regarding Asiana’s financial statements, following the airlines reporting losses and incurring larger debts that were steeper than expected.
Asiana Airlines’ co-Chief Executive Park Sam-koo has resigned and has taken responsibility for the airlines’ performance.