South Korean budget carrier Eastar Jet Co. has entered a bankruptcy protection process as a Seoul court approved its filing, which would help the airliner reduce a pile of debt before public auction and make it easier to find a new owner.

The Seoul Bankruptcy Court said on Thursday that it decided to initiate court management for the airliner. The court appointed two managers for the company including current chief executive Kim Yoo-sang.

The court’s approval for bankruptcy protection comes after Eastar Jet has failed to find a new owner.

After suffering severe liquidity troubles, this 13-year-old LCC had sought new ownership under the country’s leading budget carrier Jeju Air. The bigger rival agreed to take over the indebted smaller peer in December 2019, but the deal collapsed in July after Jeju Air canceled the agreement, citing growing risks and uncertainties from the coronavirus pandemic-driven halt to global air travel.

Since the deal with Jeju Air fell through, it has been in negotiations with different potential buyers. But it could not find anyone that was willing to take risks as a preferred bidder without guarantee from a court for the airline’s rebound.

With the initiation of bankruptcy protection, all creditors, security right holders, and shareholders are required to submit a list of their claims to the court by Feb. 18.

Pre-insolvency claims, which accrued before the opening of proceeding should be reported to the court’s civil petition center from Feb. 19 to Mar. 4, and those who fail to report may lose their rights.

Eastar Jet is also required to submit its rehabilitation plan to the court by May 20. Creditors may submit their own rehab plans for the airliner.

The court said anyone who owns Eastar Jet`s property or has a debt must not return it or pay the debt and must report it to the managers by Mar. 4.

By Ryu Young-wook and and Minu Kim

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]