Court approves Sungjeong for takeover of Korea’s Eastar Jet

Seoul Bankruptcy Court has approved Buyeo-based construction firm Sungjeong, or SJ, as the final bidder to acquire and rehabilitate Eastar Jet (ESR, Seoul Gimpo), local media reported on June 22. The court said that Eastar CEO Kim Yoo-sang had submitted an application formally requesting legal confirmation that Sungjeong is the preferred bidder and a consortium consisting of Kanglim, an affiliate of underwear maker Ssang Bang Wool, and entertainment firm IOK as secondary bidder.

Sungjeong, which confirmed last week that it intended to follow through on its role as the “stalking horse” bidder and buy Eastar Jet, is expected to sign an official investment contract with Eastar Jet on June 24. It then typically takes two to four weeks from the selection of a preferred bidder until the conclusion of the main contract, the Maeil business newspaper reported. The construction firm must submit a restructuring plan for the beleaguered AOC-less carrier to the court by July 20, and the court is likely to make a decision at the end of July to authorise the plan, after holding meetings with related parties such as creditors.

In a phone interview with The Chosun Ilbo newspaper on June 22, Sungjeong’s chairman, Hyung Nam-soon, said his goal was to “normalise” Eastar Jet within five years. Last year, hampered by financial difficulties, it returned 12 of its 16 aircraft and laid off 605 employees. It still has two B737-800s and two B737-8s, the ch-aviation fleets advanced module shows. “We will start normalizing the company with the goal of resuming the Seoul Gimpo-Jeju route in November through the re-acquisition of an AOC as soon as possible,” he said. “But to break even, there should be at least 12 passenger aircraft, and we plan to increase that number to 16. In the process of turning Eastar Jet into a profitable company by proceeding as planned, over five years the employees will be able to return.”

However, the market has raised questions about whether SJ has the necessary funds to invest considering the modest sales volumes of Hyung’s existing businesses. “I know there are concerns, but you’ll be able to watch the acquisition and management normalisation process. We have prepared all the funds we need so far, and we are confident that there will be enough in the future.” He rejected the idea that he would seek the assistance of a financial investor or sell one of his businesses, like his now much-discussed Baekje Country Club golf club.