Aircraft Parts Maker AeroSpace Technology of Korea (AST) Sheds Joint-Management Label [fn Market Watch]

[Financial News] Aircraft parts maker AeroSpace Technology of Korea (AST) has successfully completed a three-year restructuring. Since companies facing management crises rarely exit joint management, AST's normalization is expected to signal growth for South Korea's aircraft parts industry.
According to investment banking industry sources and the Financial Supervisory Service's Data Analysis, Retrieval and Transfer System (DART) on the 21st, AST was notified by its lead creditor bank, Korea Development Bank (KDB), that the joint-management procedure involving its financial creditor institutions had ended. The termination is reportedly supported by the consent of all financial creditor institutions.
The syndicated creditors' claims, excluding United Asset Management Company (UAMCO), total 78.4 billion won. The termination will take effect once 5% of that amount is repaid on the 30th. The same condition applies to the 46.1 billion won in syndicated claims held by KDB. AST is also pursuing a credit rating by the end of the year.
AST entered joint management in July 2023 after suffering a liquidity crisis caused by the downturn in the aviation industry and supply-chain disruptions resulting from COVID-19. It subsequently improved its financial structure through debt-to-equity conversions and repayment deferrals by its creditors, as well as a capital increase and external fundraising led by its major shareholder, UAMCO.
AST's debt ratio fell from 1,552% at the end of 2023 to 73% at the end of the first half of this year. It recorded 254.4 billion won in revenue and 7.3 billion won in operating profit last year. In the first half of this year, revenue reached 128.4 billion won and operating profit totaled 10.9 billion won.
Investment banking industry sources are closely watching whether AST will secure additional Boeing orders after exiting joint management.
AST has supplied rear fuselages and major components to Boeing and Embraer as a Tier 1 and Tier 2 supplier. As aircraft manufacturers work to stabilize their supply chains amid a global shortage of aircraft, the company's financial normalization could provide a springboard for new orders, industry observers said.
AST is also expanding into the defense and aerospace sectors. It supplies components for the Embraer C-390 Millennium military transport aircraft being introduced by the South Korean military and is participating in UAMCO's Aluminum Aerospace Value Chain initiative. By combining ALMAC's aluminum technology, AST's precision machining, and Aero Kotec's surface-treatment technology, the initiative is targeting the satellite and launch-vehicle components market as well.
An investment banking industry official said, "As joint management has concluded with the consent of all creditors, confidence in the company's financial normalization appears to have been restored to a considerable extent. The key now is to translate this into additional orders from global manufacturers such as Boeing and a recovery in its credit rating."
[email protected] Kang Gu-gwi Reporter