Korea Development Bank (KDB) holds the key to control of Hanjin KAL ... “No plans to sell yet”

\ \ [Financial News] With the possibility of Hoban Group becoming Hanjin KAL’s largest shareholder being discussed, the 10.58% stake in Hanjin KAL held by KDB is expected to be the key factor determining the future of control of Hanjin Group. Hanjin KAL is the holding company of Hanjin Group, which includes Korean Air. 
On the 2nd, KDB said it had no plans to sell its current 10.58% stake in Hanjin KAL before the restructuring of the aviation industry is complete. The restructuring of the airlines refers to the merger of Korean Air and Asiana Airlines, as well as mergers and restructuring among low-cost carriers (LCCs).
Hoban Group has purchased additional shares in Hanjin KAL, the holding company of Hanjin Group, and has filed a business-combination report with the Fair Trade Commission in connection with the possibility of becoming its largest shareholder. As of July, the stake held by Chairman Cho’s side was 20.57%, while Hoban’s was 20.15%—a gap of just 0.42 percentage points. 
KDB invested a total of 800 billion won in 2020 to support Korean Air’s acquisition of Asiana Airlines. The 800 billion won comprised 500 billion won invested in Hanjin KAL’s paid-in capital increase and 300 billion won in exchangeable bonds. KDB secured its 10.58% stake in Hanjin KAL (7,062,146 shares) at that time. The stake is now valued at about 934.3 billion won. That represents an unrealized gain of about 434.3 billion won against the acquisition cost of 500 billion won.

KDB has said it would consider selling its stake after the merger is complete. The merger of Korean Air and Asiana Airlines is scheduled to be completed on Dec. 17 this year. By the end of the year, the restructuring of South Korea’s aviation industry, which has been underway since 2020, will effectively be entering its final stage. The merger of the three LCCs—Jin Air, Air Busan and Air Seoul—is targeted to launch on March 17 next year, three months after the Korean Air–Asiana merger. Under KDB’s official position, the stake recovery (sale) would have to proceed in the first half of next year. Investment industry observers say KDB has come to hold the “casting vote” in the Hanjin KAL control dispute. If it sells the stake to allies of Chairman Cho’s side, it could face criticism for helping the current management defend its control. Conversely, transferring it to Hoban Group could spark controversy over a state-run bank having played a decisive role in a change of control.
President Lee Jae-myung’s order last November to completely halt sales of government assets is also expected to become a factor in the Hanjin KAL control dispute. Lee halted the sale of government assets to head off controversy over preferential treatment and sales at bargain prices. As a result, there has been little movement on plans to sell stakes held by state-run banks in Korea Aerospace Industries (KAI, held by the Export-Import Bank of Korea (KEXIM)) and HMM (held by KDB). 
[email protected] Jo Eun-hyo Reporter