KDB's 'controversial' capital reduction plan for Asiana

Korea Development Bank (KDB) is in the hot seat over its decision to undertake an equal reduction in share capital for cash-strapped Asiana Airlines. For corporate restructuring, creditors often adopt a differential capital reduction drive and apply steeper reduction for major shareholders than minority shareholders. This is because large shareholders should be held responsible for poor management. But the main creditor of Asiana decided not to follow the typical restructuring process to keep its earlier promise to Kumho Industrial, the major shareholder of Asiana. The state-run lender offered to sell Asiana shares obtained by Kumho at a "reasonable price" without taking steps for the differential capital reduction in 2019 when Asiana's restructuring was in its infancy. At that time, this raised controversy that the creditor was giving preferential treatment to the management of Kumho Industrial. Even if former Kumho Asiana Group Chairman Park Sam-koo stepped down from the leadership in March 2019, a group of management-level executives who worked with Park still maintain their seats on the company's board of directors. "Controversies will continue to repeat over the relationship between KDB and Kumho unless the creditor takes steps for the differential capital reduction," an industry source said. "But KDB is unlikely to change its position for the time being due to the backlash from Asiana's minority shareholders, as this means KDB broke its promise and acknowledges that its earlier decision has failed."<br/>