The acquisition of South Korean low-cost carrier Eastar Jet continues to face uncertainties, with two main bidders competing neck and neck on Wednesday after their rivals abandoned earlier in the week.
The two bidders are local construction firm SJ Co. and a consortium led by underwear maker Ssang Bang Wool and OEM Kanglim, according to sources.
SJ’s bid is priced at 80 billion won ($ 71.6 million), below the estimated 100 billion won offered by the SBW consortium.
Under the stalking horse auction method, SJ would have the priority right to renew the amount of its original bid, if the SBW consortium submitted a higher bid. In bankruptcy cases, a stalking horse offer refers to an agreement with a potential buyer that is hidden from the public, creditors and the courts.
Ssang Bang Wool had seen its share price peak at 1,445 won ($ 1.29) the day before, as its consortium was expected to be the sole bidder. The figure, however, was down 24.4% from yesterday’s close of 1,050 won on Wednesday, as the mid-size maker’s rival was in sight.
But as the financially troubled airline’s creditors should put weight on the bid amount, the SBW consortium is still seen to have a fair chance in the game.
Eastar Jet’s historic total debt is estimated at over 200 billion won, with past due wages and retirement allowances in excess of 70 billion won.
“It appears that the key to this auction race is whether SJ Co. manages to secure the additional funds to catch up with the amount suggested by the SBW consortium,” said an official familiar with the matter.
SJ has until the end of Friday to send his written response to the Seoul Rehabilitation Court, deciding whether to increase his bid or give way to the highest bidder.
Earlier this week, Pan Ocean, a shipping company under the wing of poultry producer Harim Holdings, effectively dropped out of the race because it failed to submit a bid by the Monday afternoon deadline.
The reason for the waiver, officials said, was not only the price of the deal, but also the uncertainties surrounding the acquisition of the debt-ridden airline.
In January this year, Eastar filed for receivership after months of struggle, as most of his flight routes were suspended amid the protracted pandemic and his air operator certificate became ineffective in May. from last year.
Previously, another LCC operator, Jeju Air, set out to acquire a 51% stake in Eastar for 69.5 billion won, but then reduced the amount to 54.5 billion won and ended up canceling the entire deal. ‘agreement in July 2020.
Data from Cirium’s fleets shows Eastar has four planes in stock, two Boeing 737-800s and two 737 Max 8s, as well as four Max 8s.
By Bae Hyun-jung ([email protected])