Korean Air Lines to sell a record 1 trillion won of stock
Korean Air Lines said on Wednesday it will issue more than $800 million worth of new shares to overcome a liquidity crisis it is facing as a result of the coronavirus pandemic.
The carrier on Wednesday held a board meeting, attended by company chairman Cho Won-tae, and voted to issue 1 trillion won ($816 million) worth of new shares. Its current market capitalization is 1.73 trillion won.
The fundraising effort is a part of the company’s recovery plan, initiated after the pandemic left 90 percent of international flights canceled.
Combined with the 1.2 trillion won in loans from the Korea Development Bank and the Export-Import Bank of Korea, announced late last month, Korean Air Lines will have raised 2.2 trillion won in funding since the outbreak began to take its toll.
Almost 80 million shares are to be sold at around 12,600 won each — the company’s shares traded above 18,000 on Wednesday. The final stock price will be set on July 6, and the selling of the equity will begin July 9.
The new shares will be listed on the Korea Exchange on July 29.
The airline hasn’t issued stock in three years. In 2017, it sold 450 billion won worth of shares. The current sale will be first time the airline issued new shares worth more than 1 trillion won. Existing shareholders will get a priority to purchase the stock.
Hanjin KAL, the airline’s largest shareholder, is expected to discuss the purchase of the new shares at a board meeting scheduled to take place on May 14. Hanjin KAL owns 29.96 percent of the airline. As of late last year, Hanjin KAL had 189.2 billion won in cash and cash equivalents.
“The issuance of new stock is expected to help,” said analyst Bang Min-jin from Eugene Investment & Securities. “It also seems to be part of the airline’s effort to receive [additional] government support.”
The government on Tuesday confirmed that 40 trillion won in funds will go only to the aviation and shipping industries, instead of the previously mentioned seven industries.
As part of its recovery plan, Korean Air Lines had 70 percent of its workforce take paid leave for six months, starting last month. It is also selling assets. Starting next month, the airline is resuming around 20 new international routes. Korean Air Lines plans to announce its first-quarter results on Friday.
BY JIN MIN-JI [email@example.com]