이 기사는 2022년 03월 04일 08:01 thebell 에 표출된 기사입니다.

South Korea’s Hanjin KAL is planning to raise funds in the public bond market for the second consecutive year amid sluggish performance due to the Covid-19 pandemic.

Hanjin KAL, Hanjin Group’s holding company, recorded revenue of 399.2 billion won ($362 million) and an operating loss of 194.9 billion won in 2021. It saw a decline in revenue by 2.4% but its operating loss was narrowed by 11.9% year-over-year. The company’s net loss sharply decreased to 44 billion won from 341.5 billion won a year ago.

Hanjin KAL generates revenue from its subsidiaries like Korean Air Lines, Hanjin and Jin Air. Korea Investors Service and Korea Ratings assigned a rating of BBB0 with a stable outlook on Hanjin KAL’s corporate bonds. The company has faced a possible credit rating downgrade after credit rating agencies downgraded its outlook from stable to negative after the pandemic. Yet, they upgraded the outlook again to stable earlier this year, easing pressure on the company.

The outlook upgrade is attributable to earnings improvement of Hanjin KAL’s crown jewel Korean Air thanks to the boom in the air cargo business. The nation’s largest full-service carrier generated an operating profit of 1.42 trillion won on revenue of 9.02 trillion won in 2021, proving its ability to generate stable revenue despite reduced passenger travel demand.

Hanjin KAL’s total borrowings stood at 1.07 trillion won at the end of 2021 on a non-consolidated basis. Debts worth 783.4 billion won will mature in less than a year, but the firm is expected to refinance the debts smoothly.

In January, Korean Air attracted 353 billion won in bids in its 200 billion won bond issuance. Thanks to strong demand for high-yield notes, it increased the offering and successfully sold bonds worth 300 billion won.

Focus on Korean Air's acquisition of Asiana Airlines

Credit rating agencies said it remains to be seen whether Hanjin KAL can fully recover to pre-pandemic levels as its major subsidiaries have been hit hard by the pandemic.

Hanjin KAL recorded earnings before interest, taxes, depreciation and amortization (EBITDA) of negative 82.2 billion won in 2020 and negative 17.4 billion won in the first nine months of 2021.

Continued financial support for its subsidiaries may put Hanjin KAL under pressure as well. The holding company has participated in rights offerings carried out by Korean Air, Jin Air and Hanjin Travel Service. It also lent money to KAL Hotel Network.

As a result, Hanjin KAL’s debt-to-equity ratio jumped from 89.6% at the end of 2019 to 128% at the end of September 2021, with the total borrowings-to-total assets ratio rising from 33% to 42.4%. Hanjin KAL may have to pump more money into its subsidiaries as they continue to show disappointing performance.

It is also worth noting whether an acquisition of Asian Airlines will deteriorate Korean Air’s financial status. South Korea’s antitrust regulator granted conditional approval for Korean Air’s 1.8 trillion won acquisition of its domestic rival last month. Asiana Airlines will become a subsidiary of Korean Air if overseas authorities approve the takeover.

Korean Air’s debt-to-equity ratio is expected to skyrocket from 275.4% to 437.8% after the acquisition. Whether the transaction will create strong synergy will be the key.

Korean Ratings said it will closely watch the acquisition process, competitiveness after incorporating Asiana Airlines into an affiliate and improvement of financial structure. (Reporting by Seok-cheol Choi)