Underwear maker vs. construction firm for Korea’s Eastar Jet

The only company left to take part in preliminary bidding for Eastar Jet (ESR, Seoul Gimpo) is a consortium led by underwear specialist Ssang Bang Wool, after the favourite, livestock and logistics firm Harim Group, pulled out, Yonhap News Agency reported on June 14. Ssang Bang Wool, which is bidding for the indebted budget carrier through its subsidiary Kanglim, a heavy-duty vehicle and crane manufacturer, is now left to compete head-to-head in a two-horse race with a local construction firm that was previously selected as a preferred bidder, sources told the news agency. That firm is little-known SJ Industrial Co., a “medium-sized” company that Eastar Jet chose to be its anonymous “stalking horse” investor in May. It has already submitted its bidding price, under which other bidders cannot submit a price. Busan-based SJ Industrial owns Baekje Country Club, a golf course in Buyeo about 140 kilometres south of Seoul, and Daeguk Construction, a small wrecking and demolition firm based in Hampyeong, southeastern Korea. It is unclear what SJ’s or Ssang Bang Wool’s motives might be in buying an insolvent and AOC-less airline. The sources said that SJ Industrial cannot match Ssangbang Wool Group in terms of financial power. The annual sales of the country club and Daeguk Construction are about KRW30 billion won (USD26.8 million) and KRW14 billion (USD12.5 million), respectively. SsangBang is understood to have made a preliminary bid of around KRW100 billion (USD89.5 million). The winner will also have to take on Eastar Jet’s debts, which the sources reported as including KRW70 billion (USD62.6 million) in unpaid wages and severance pay and creditors’ claims of about KRW185 billion (USD165.5 million). Harim Group shipping subsidiary Pan Ocean and a number of private equity funds that had previously shown interest in the carrier failed to submit bids by the deadline, the sources said. Eastar will now review the bids and the bidders’ financing and post-acquisition business plans to select a final preferred suitor on June 21. The preferred bidder will then spend about ten days conducting further due diligence on Eastar Jet before signing a deal to buy it in July. Currently in a court-led corporate restructuring process, Eastar Jet must submit its own debt-repayment and other rehabilitation plans to the court by July 20.