[새해 금융이슈] Ssangyong Motor Restructuring·Airline Integration… Mountain-eun task bandit

Employees are coming to work at Ssangyong Motors headquarters in Pyeongtaek, Gyeonggi-do. 2020.12.22/News1 © News1 Reporter Cho Tae-hyung

The Korea Development Bank is expected to have a busy year again this year with financial support and industrial restructuring for companies in liquidity crisis.

For Ssangyong Motor, which earned two months before the legal administration, the KDB should lead Ssangyong Motor’s restructuring plan, such as securing new investors as the representative creditor.

The integration work between Korean Air and Asiana Airlines also has many remaining gateways, such as negotiations with unions and examination of business combinations. A system to monitor Hanjin Kal’s management must also be established. The KDB is also responsible for restructuring the aviation industry, including low-cost airlines (LCC).

◇Ssangyong Motor’s representative bond bank, San, put forward a principle, but… ‘Clue’ to find new investors

According to the financial sector on the 3rd, Korea Development Bank participated as a representative creditor bank at the creditors council that will lead Ssangyong Motor’s Autonomous Restructuring Support (ARS) program at the end of last month. The ARS program is a system that gives the courts time to voluntarily consult with creditors without making an immediate legal management decision for companies that have applied for rehabilitation.

A total of 8 companies including Korea Development Bank, Woori Bank, foreign banks JP Morgan, and the BOA, including 4 financial companies and 4 commercial creditors, will discuss the restructuring plan of Ssangyong Motor by February 28th. The best scenario is for Ssangyong Motor to withdraw the application for corporate rehabilitation procedures after a corporate improvement agreement is prepared within two months.

Last year, Ssangyong Motor made several requests to KDB for assistance, but KDB showed negative stances each time. It is difficult to support Ssangyong Motor because of its inconsistent with the restructuring principles that Chairman Lee Dong-geol believes, such as the sustainability of the business, responsible behavior of major shareholders, and the sharing of pain among stakeholders.

The business condition of Ssangyong Motor, which applied for corporate rehabilitation (legal management), is deteriorating because the principal and interest of loans of KRW 255.4 billion (as of December 22) borrowed from the Bank of Korea and the like were overdue. Ssangyong Motor recorded a deficit for 15 consecutive quarters from 2017 to the third quarter of this year, and the capital erosion rate reached 86.9% on a consolidated basis at the end of the third quarter.

In a situation where there is no possibility for Ssangyong Motor to repay on its own, it is difficult to satisfy creditors such as Korea Bank even if it undergoes intense restructuring. In the end, finding new investment destinations is the key to consensus by creditors. First of all, Saneun is looking forward to negotiations with the US HAAH Automotive Holdings, where Mahindra, the parent company of Ssangyong Motor, is in progress, but the wait is getting longer.

It is a view from inside and outside the financial sector that Ssangyong Motor will go into court management if it does not find a new investment destination, and there is a high possibility of going to liquidation at this time. Tens of thousands of livelihoods are in jeopardy when Ssangyong Motors collapses. According to Ssangyong Motor, only about 600,000 workers and families are working in Ssangyong Motor and related industries. The dilemma is growing as it is difficult for the state-owned bank, Saneun, to ignore such employment security issues.

Korean Air and Asiana Airlines passenger planes are preparing for take-off to the Incheon International Airport stand. 2020.12.1/News1 © News1 Reporter Seongcheol Lee

◇Korean Air-Asiana integration has crossed a big gateway… Union persuasion, business combination review remains

The integration work between Korean Air and Asiana Airlines, led by Sangeun last year, is also ongoing. Although negotiations for the sale of Asiana with HDC Hyundai Development Company failed, a new acquirer called Korean Air was found, but there are still many mountains to overcome.

The activist private equity fund KCGI’s application for provisional injunction to ban the issuance of new shares has been rejected, but the union’s opposition remains. The Asiana Airlines union, which refused to ask for talks with Saneun, met with Saneun, but still has not been able to narrow the disagreement. The union is demanding the formation of a labor-management meeting with Korean Air, Asiana Airlines, Korea Bank, and the Ministry of Land, Infrastructure and Transport. However, Saneun is in a position that it is difficult to organize a conference body.

It is also difficult to assure that the corporate merger screening between Korean Air and Asiana Airlines is easy. The Fair Trade Commission’s review may pass, but if even one of the foreign competition authorities opposes, pain is inevitable.

Participating in the management of Hanjin Kal, the parent company of Korean Air, and managing the integration work is also a major task of this year. In accordance with the seven obligations imposed on Hanjin Kal, the KDB should appoint three outside directors to participate in the company’s board of directors this year, and form a management evaluation committee and an ethical management committee to check management. As such a surveillance system is operating for the first time this year, it should be established stably while minimizing controversy.

Management of LCC (low cost airlines), which is more difficult to manage than large airlines, is also one of KDB’s tasks this year. Already last year, KDB supported Jeju Air, T’way Air, Air Seoul, and Air Busan. However, as the aviation industry is unlikely to improve this year, there are likely to be companies reaching out again. As Hanjin Group and the three Asiana-affiliated LCCs Jin Air, Air Seoul, and Air Busan are announced, careful management should also be carried out in the extension of Korean Air-Asiana integration.

The expected merger between Daewoo Shipbuilding & Marine Engineering and Hyundai Heavy Industries was not completed last year. Hyundai Heavy Industries submitted a business combination review report to the EU in November last year, but it was finally passed this year as it was delayed in the aftermath of Corona 19. It is also the role of the bank to continuously manage companies that are heading for normalization after large-scale public funds have been invested. When GM Korea and HMM started a labor-management conflict last year, the KDB expressed concern towards the union.

An official from the financial sector said, “There is anticipation for an economic recovery through vaccine development, but the Corona 19 crisis is currently ongoing.”

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