State banks step in to bailout troubled Asiana Airlines

State-run Korea Development Bank and Export-Import Bank of Korea announced Tuesday they will inject a combined 1.7 trillion won ($1.40 billion) of fresh funds to keep the cash-strapped flag carrier Asiana Airlines afloat.

The two policy banks held meetings to decide on the size of additional financial support measures for the nation’s second-largest airliner.

The rescue move came after HDC Hyundai Development, a real estate developer set to acquire Asiana Airlines, requested the two banks extend repayment deadlines for the air carrier hit by the coronavirus and lower interest rates.

Since last year, the two state-run banks provided a combined 1.6 trillion won ($1.3 billion) for the struggling airline -- 500 billion won worth of Asiana Airlines’ perpetual bonds, credit lines of 800 billion won and credit guarantees for 300 billion won. Such financial assistance, however, has so far been short of getting the money-bleeding airliner back on track.

HDC initially planned to raise around 1.5 trillion won by issuing new stocks of the airline and repaying some 1.2 trillion won in debt the airline owes to the two state banks with the fund.

While issuing 300 billion won of additional bonds, HDC has planned to close the 2.5 trillion-won acquisition deal by the end of this month. The planned acquisition, however, is unlikely to wrap up this month, according to market watchers.

“The HDC deal is apparently hit by the pandemic from the ongoing coronavirus pandemic and the company seems to have been waiting for the government to take actions to remove some hurdles such as cutting interest costs,” said an industry source who wished to remain anonymous.

For Asiana’s capital increase, HDC has to receive approval from six nations, the US, China, Uzbekistan, Turkey, Kazakhstan and Russia, in which the Korean airline runs operations. Its acquisition plan has received the approval of all the nations except Russia.

By Kim Young-won (wone0102@heraldcorp.com)