KAI to give minority stake to creditors in exchange for new loans

Korea Aerospace Industries' (KAI) biggest creditors have agreed to accept a minority stake in the company in exchange for writing off debts of 75 billion won ($62.25 million).

The creditors, including Korea Exchange Bank, have also agreed to provide new loans amounting to 80 billion won, while KAI's three parent companies - Daewoo, Hyundai and Samsung - will inject an additional 100 billion won.

According to KAI, the transaction should take place this month, and will increase KAI's capital base to over 450 billion won. The transaction will reduce KAI's debt-to-equity ratio by about half, to 150%, a goal to which it has long aspired. KAI says it is unclear as to what size stake will be given to creditors, and stresses that the shares to be handed over will be non-voting shares.

KAI is now divided equally among the three South Korean chaebols, which formed the company in late 1999 from parts of their aerospace divisions as a result of government pressure for consolidation among the country's conglomerates.

Source: Flight International