Desperate Kumho Asiana decides to sell flagship carrier
SEOUL (The Korea Herald/ANN) - Debt-ridden Kumho Asiana Group said Monday it has decided to sell its core unit Asiana Airlines after approval from an emergency board of directors meeting, a day after the financial authorities and creditors rejected its latest self-rescue proposal amid a snowballing liquidity crisis.
“For normalization of Asiana Airlines, we considered the best option and decided that its sell-off will recover trust of the group and the airline,” the group said in a statement.
“The sale of Asiana -- with 30-year-long history -- is also for sake of the future development of the company, as well as for some 10,000 employees,” it said, adding that the group will proceed with the sale process.
Without Asiana, the group will be left with construction firm Kumho Industrial, Kumho Buslines and Kumho Resort.
Currently, former Chairman Park Sam-koo holds 45.3 stake in Kumho Busline -- which owns Kumho Industrial, that has 33.47 per cent stake in the air carrier.
While market insiders view that the acquisition price for Asiana will be at least 1.6 trillion won, it can go up depending on the number of buyers and sales of aviation license and flight route premium.
SK Group and Hanwha Group are mentioned as potential buyers, as both have shown interest in having air carrier business and are actively seeking business expansion through mergers and acquisitions.
Beginning with a taxi service in Gwangju in 1946 by founder Park In-chon, the airline-to-terminal conglomerate once rose to the nation’s seventh-largest group, with Asiana accounting for more than 60 per cent of its total sales.
The air carrier reported a record-high 7.1 trillion won insales last year, but its operating profit came at 28.2 billion won with net loss of 195.9 billion won. Kumho Asiana has debts of 3.2 trillion won, with 1.2 trillion won due this year.
Market insiders said that Kumho Asiana Group was hit hard by a liquidity crunch from the takeover of Daewoo Engineering & Construction in 2006. Four years later, Korea Development Bank purchased Daewoo Engineering to help the debt-ridden parent group restructure its finances.
In the following years, it sold subsidiaries including Kumho Life Insurance, which is now KDB Life Insurance, and Kumho Tire to secure cash.
Last week, Kumho Asiana asked its main creditor state-run KDB for an additional 500 billion won in financial help. As part of its self-rescue measures, the group promised to sell off Asiana if it fails to meet creditors’ demands in three years. It also offered the private assets of former Chairman Park and some of his family members as collateral.
But the creditors and Financial Services Commission rejected the proposal, citing the group’s lack of ability to regain market trust.
Instead, FSC Chairman Choi Jong-ku and creditors urged the group’s founding family to sell their personal assets and submit a plan to raise funds through a rights issue.
(USD 1 = KRW 1,133.87)