Asiana Airlines to issue $132 mn 30-yr bonds at 8.5% coupon

2019.03.15 14:00:23

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South Korea’s second largest full-service carrier Asiana Airlines Inc. will issue perpetual bonds worth 150 billion won ($132 million) this year to improve liquidity prior to the introduction of stricter IFRS16 accounting standards.

According to a disclosure by Asiana Airlines on Thursday, its board approved the offering of 30-year hybrid bonds in the scale of 85 billion won on Friday and 65 billion won on Mar. 29 to obtain working capitals and repay maturing debts. A coupon rate is set at 8.5 percent. The securities will be offered with an option to call two years after the issuance.

The company expects the issuance would help push down its debt ratio by 104.1 percent from late last year.

Its debt ratio stood at 700.5 percent as of the end of last year and would go up under the new standard as Asiana Airlines has many of its aircrafts in operating lease contracts. With the adoption of IFRS16 early this year, its aircraft leasing contracts will be reflected as financial lease, a move that will sharply increase the company’s debt ratio.

Hybrid bonds are regarded as an asset, rather than debt in the balance sheet, so that companies that need to expand capital often opt to issue hybrid bonds. Hybrids are perpetual bonds that pay return rates as in equity pays dividends.

By Park Yun-gu and Lee Ha-yeon

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