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Business

Asiana Airlines chief to step down after accounting fiasco

Creditor KDB demands action in return for restructuring support

SEOUL -- Asiana Airlines boss Park Sam-Koo is stepping down as chief executive of South Korea's second biggest carrier, and as chairman of its parent Kumho Asiana Group, after an accounting scandal which left the airline's shares suspended earlier this week.

Park's resignation is now expected to unlock creditor support for a restructuring of the heavily-indebted carrier. Two local credit ratings agencies recently warned the company's total debt - at 7.1 trillion won in December could be relegated to junk status after auditors qualified the company's 2018 accounts.

Korea Development Bank, its biggest creditor, had pressed for Park's departure after Asiana shares were briefly suspended as a result of the auditor's actions. They resumed trading on Tuesday after the group agreed to refile its financial statements.

"We asked Kumho to submit a plan which can ease the market's worries," said the lender in a statement. "We will communicate with Kumho closely to have measures to normalize Asiana."

Shares of Asiana jumped 2.92% to 3,520 won on the announcement. The benchmark Kospi closed at 2,128.10, down 0.82%.

Asiana shares were suspended from March 22 to 25 after its auditor, Samil PwC, raised questions over declared revenues and losses. Asiana was forced to restate its numbers to include debt from aircraft leasing and revised values for equity stakes. Those changes reduced the declared operating profit for 2018 from 88.7 billion won to 28.2 billion. Its net loss also expanded from 106.6 billion won to 197.9 billion won as a result of the compulsory changes.

Asiana’s total debt also rose from 6.96 trillion won to to 7.1 trillion won after the restatement. Its debt-to-equity ratio jumped to 649% from the previous level of 505%. 

Analysts suggested that KDB could now put Asiana up for sale if it was unable to pay back debt.

"KDB holds the key. Asiana Airlines can go through a sale process," said Ra Jin-seong, an analyst at Kiwoom Securities. "As Chairman Park offered to resign, the ball is in KDB's court."

Park's resignation is the second high profile upset in the county's aviation sector in two days, coming after Korean Air Chairman Cho Yang-ho was ousted from his post at a shareholders' meeting on Wednesday. Cho was indicted in October for allegedly embezzling 27 billion won of corporate funds.

Korean Air's holding company, Hanjin-KAL, will also face investor opposition at its annual meeting on Friday when local activist fund Korea Corporate Governance Improvement is expected to vote against the reappointment of Hanjin-KAL's CEO Suk Tae-Soo, chairman Cho's right-hand man, as a board director. KCGI is the second-largest shareholder of Hanjin-KAL with a 12.8% stake.

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