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.
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, however, it wanted to proceed with the acquisition and that the developer’s own survival hinged on getting a good deal done.
Asiana declined to comment. Korea Development Bank, its lead creditor, said in a statement on Wednesday it welcomed Hyundai Development’s continued commitment to acquire Asiana and called on it to suggest new terms first.
Reuters phone calls to Mirae seeking comment went unanswered.
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.
Even if Hyundai Development 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.
Reporting by Joyce Lee and Hyunjoo Jin; Editing by Gerry Doyle and Edwina Gibbs