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Planes of South Korea's top flag carrier Korean Air Lines and No. 2 carrier Asiana Airlines are parked at Incheon International Airport, west of Seoul, on Monday. (Yonhap) |
Hanjin KAL, the parent company of Korean Air Lines, on Tuesday signed an agreement with Asiana Airlines Inc.'s main creditor Korea Development Bank for its acquisition of the smaller carrier.
The investment agreement calls for the KDB to inject 800 billion won ($723 million) into Hanjin KAL through a rights offering and convertible bonds.
Under the deal, Hanjin KAL is required to select three of its outside directors and members of an inspection committee, which will all be designated by the KDB.
Currently, Hanjin KAL has three executive directors and eight outside directors.
Hanjin KAL is also mandated to hold prior consultations with the KDB and acceded to the state-run bank's positions on major issues.
The mandatory clauses are meant to give oversight powers to the KDB -- which will have a 10.66 percent stake in Hanjin KAL -- over the holding company of airline conglomerate Hanjin Group.
The deal came a day after Korean Air's announcement that it will acquire Asiana Airlines in a deal valued at 1.8 trillion won. The deal would create the world's 10th-biggest airline by fleets.
Korean Air plans to raise 2.5 trillion won via rights offerings early next year. Of the proceeds, it will spend 1.5 trillion won to buy new shares to be sold by Asiana and 300 billion won worth of Asiana perpetual bonds, the company said in a statement.
Hanjin KAL is set to participate in the 2.5 trillion won worth of stock sale by Korean Air early next year.
Korean Air, currently the world's 18th largest, will become Asiana's biggest shareholder with a 63.9 percent stake if the acquisition is completed.
On Monday, Kim Sang-do, deputy minister for civil aviation at the Ministry of Land, Infrastructure and Transport, said it is an "inevitable decision" to integrate the country's two biggest airlines to prevent them from making bigger losses amid the extended COVID-19 pandemic.
Hit hard by the unprecedented pandemic, airlines have suspended most of their flights on international routes since March, and travel demand has dried up.
South Korea's antitrust regulator will review the deal over the issue of monopoly. If things go smoothly, the deal is expected to be completed by June next year. (Yonhap)
