Korea’s Eastar Jet ready to open bids for stake sale – CEO

Eastar Jet (ESR, Seoul Gimpo) plans to open bidding for the sale of a majority stake in the airline by April 20, then to select a new investor by early May and resume flights in June, Kim You-sang, the company’s chief executive has told Yonhap News Agency. Kim claimed that a number of companies had shown an interest in acquiring Eastar Jet since the Seoul Bankruptcy Court initiated corporate rehabilitation proceedings at the grounded and indebted low-cost carrier on February 4, three weeks after granting it insolvency and protection from creditors. Its Air Operator’s Certificate (AOC) will be reinstated once the court accepts the restructuring and rehabilitation schemes, the chief executive assured. Eastar Jet plans to issue a bid announcement between April 15 and 20, with the approval of the court, and will soon decide whether to choose an investor through a “stalking-horse” manoeuvre or an open auction. In the former, a preliminary preferred bidder would be chosen ahead of an auction, with the stalking horse setting the low-end bidding price which other bidders cannot underbid. “Once the company has a potential investor and decides to proceed with the stalking-horse bid later this month, the Seoul Bankruptcy Court will be able to start the bidding process to pick the investor early next month,” Kim said, elaborating that Eastar Jet plans to give its rehabilitation plan, including a debt repayment scheme, to the court by May 20 ahead of resuming flights on domestic routes in June. Currently, Eastar Jet owes public interest debts such as unpaid wages and severance pay totalling KRW70 billion won (USD63 million), plus debts that creditors have reported to the court, amounting to about KRW185-200 billion (USD165-179 million), according to Yonhap. The carrier’s inactive fleet currently consists of two B737-800s leased from World Star Aviation and two B737-8s belonging to Minsheng Financial Leasing, according to the ch-aviation fleets advanced module. The company has virtually no tangible assets – only intangible ones that have value when operated by the airline, such as route licences, transportation rights, and slots. As an unnamed industry source told the news agency: “This will be a good example of how to value airlines’ intangible assets. Once the acquisition is decided, Eastar Jet is expected to enter a system of emergency management.”