Hanjin KAL secures liquidity to keep chairman's control of firm

Korea Development Bank may sell off its 10.6% stake in Hanjin to a third party that isn't supportive of Chairman Cho, market watchers say

Korean Air Lines' aircraft (Courtesy of Hanjin Group)
Korean Air Lines' aircraft (Courtesy of Hanjin Group)
Hyun-Ju Jang 2
2023-08-08 18:35:57 blacksea@hankyung.com
Airlines

Hanjin KAL Corp., the holding firm of South Korean flag carrier Korean Air Lines Co., is actively raising money via bond issuances and sale of properties as a sizeable portion of its debts are maturing soon.

It also needs ample liquidity as the state-run Korea Development Bank (KDB), which holds a 10.6% stake in Hanjin KAL, may sell off its share to a third party who is not friendly shareholder to Hanjin Group's top management, market watchers say.

The holding firm raised 24 billion won ($18.2 million) by issuing bonds in the private market on Aug. 4, with a 16-month maturity at a 5.1% yearly interest rate, according to its regulatory filing on Monday. The fundraising follows a 10 billion won bond issue on July 7, with 18-month maturity at a 5.3% annual interest rate. The firm said the fund will be used for business operations.

Hanjin KAL is speeding up the fundraising as Korea Ratings increased its credit outlook from BBB stable to BBB positive on April 7, citing the impoving financial conditions of major subsidiary Korean Air Lines.

The holding firm hasn’t returned to the public debt market since March 2022 when it issued one-year 10 billion won bonds and two-year 53 billion won bonds. It takes a more careful approach to the public market as its credit rating is still a medium-grade score, market watchers said.

Hanjin KAL needs liquidity in preparations for its 51 billion won worth of bonds maturing later this year and 53 billion won worth of bonds’ in March of next year. The firm’s cashable assets amount to 164.7 billion as of March 31.

The company will also disinvest properties to raise more money. Hanjin KAL said on Aug. 3 that it will sell part of its real estate asset, which was used as Korean Air Lines’ headquarters between 1984 and 1997, at 264.2 billion won.

Hanjin KAL may reserve the cash to protect Chairman Cho’s control over the group. He is the largest shareholder with a 5.8% stake, and parties with special interest, supportive of Cho’s management, own a combined 23.7%.

One of the parties with special interest, KDB may sell off the share if Korean Air Lines’ 1.8 trillion won purchase of its smaller domestic rival Asiana Airlines Inc. collapses. Hanjin KAL management is concerned if the deal drops and KDB divests of the share to a third party who is not supportive of the chairman, market insiders say.

Write to Hyun-Ju Jang at blacksea@hankyung.com

Jihyun Kim edited this article.
#Hanjin KAL Korea #Korean Air Lines #Asiana Airlines #Korean Air Lines-Asiana deal #Korea Development Bank #Hanjin KAL debt issuance

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