Asiana exits voluntary debt workout program

Asiana Airlines, Korea’s second-largest air carrier, has ended a voluntary arrangement for debt restructuring following approval from creditor banks on Friday.

According to the carrier, its eight creditor banks including the Korea Development Bank all gave the green light for the company to finish the voluntary arrangement. The flagship carrier is now officially “normalized” after five years.

“The reason why creditors decided to end the voluntary arrangement is that they acknowledged Asiana’s ability to manage the company on its own,” said a spokesman from Asiana.

Asiana entered the voluntary arrangement in 2010 following Kumho Asiana Group’s liquidity crunch, which stemmed from the acquisition of Daewoo Engineering and Construction. The voluntary arrangement was set for two years, but the debt-restructuring agreement with creditors was extended two times because the company’s financial condition remained unstable.

Creditors said that since Asiana was able to get financing following the improvement of its financial health and also met the goal of paying back remaining debts under the plan, they decided to end the arrangement.

In addition, since Asiana is expected to purchase more new aircraft in the next few years, creditors also decided to extend the maturity date of bonds worth 1 trillion won ($900 million) for two years, alleviating debt-payment pressure for Asiana.

Other Kumho Asiana Group affiliates will soon follow the airline.

Creditors of Kumho Tire also discussed an end to a debt workout program on Thursday. Creditors are expected to make a decision on Dec. 18.

Kumho Tire, Korea’s second-largest tire manufacturer, had a debt-to-equity ratio of 858 percent in 2010, but lowered it to 290 percent in the first half of this year. Its credit rating also rose from BBB- to BBB.

Once the end of the debt workout program is confirmed, Kumho Asiana Group will focus on purchasing back shares owned by creditors. The chaebol’s first goal will be buying shares of Kumho Industrial, the de facto holding company of the conglomerate, which is also under a debt workout program.

Creditors said Kumho Industrial’s debt program will come to end once they sell a 57.5 percent stake of Kumho Industrial by the first half of 2015. For Kumho Tire, nine creditors have a combined 42 percent stake. Kumho Asiana Group Chairman Park Sam-koo has the right to buy back creditors’ shares in priority.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]