South Korea’s Hyundai Development Co said on Tuesday it wants new terms for its acquisition of Asiana Airlines after debt at the debt-ridden carrier increased by some $3.8 billion.
The builder also called for state-funded creditors of Asiana to provide support for the loss-making airline, which is grappling with how the coronavirus outbreak crippled travel demand around the world.
A consortium of Hyundai Development and brokerage Mirae Asset Daewoo agreed in late December to purchase the airline for about 2.5 trillion won ($2.1 billion).
Since then, however, Asiana Airlines recognised an additional 2.8 trillion won of debt as of end-2019 and borrowed 1.7 trillion won more, Hyundai Development said in a statement.
The unexpected increase, the carrier’s failure to discuss the situation with Hyundai Development before incurring more debt and its support of unsound affiliates had prompted Hyundai Development to ask creditors to renegotiate, the developer said.
“There are various situations that are happening and having a gravely adverse impact on the acquisition and significantly damage the acquisition value,” Hyundai Development said in a statement.
Hyundai Development, which had already delayed the deal closing date from April 30, added that it still wants the transaction to proceed despite the pandemic.
“Whether the group survives or not hinges on this deal,” it said.
Asiana Airlines declined to comment. Korea Development Bank, its lead creditor, did not have an immediate comment.
The airline had total debt of 13.2 trillion won as of end-March, according to regulatory filing.
Hyundai Development shares rose 5.7%, while Asiana Airlines climbed 2.7% in the wider market that was down 0.3%.
Last year, Kumho Industrial, the top shareholder of Asian Airlines, put its 30.77 stake for sale, under pressure from creditors, including state-funded Korea Development Bank.
The move came after Asiana failed to win auditors’ sign-off on its 2018 financial statements, triggering warnings of credit ratings downgrades, a sharp earnings revision and the resignation of the parent group’s chairman.