Creditors' plan to sell the debt-laden Asiana Airlines Inc. to its bigger rival Korean Air Lines Co. faces a bumpy road as a local equity fund has filed an injunction against the plan.

On Tuesday, Asiana's main creditor, the Korea Development Bank (KDB), signed an investment agreement with Korean Air's parent Hanjin KAL Corp. to inject 800 billion won ($723 million) into Hanjin KAL through a rights offering and convertible bonds. Hanjin KAL will then participate in a 2.5 trillion-won stock sale by Korean Air that will be used to acquire Asiana.

A day later, the homegrown equity fund Korea Corporate Governance Improvement (KCGI), representing an alliance that opposes the deal, filed an injunction against the KDB's plan to join Hanjin KAL's rights issue on the grounds that the share sale to the designated third party will damage the Hanjin Group holding firm's existing shareholders' value.

If the court accepts the fund's injunction request, the deal will fall apart and Asiana will be placed again under control of its creditors.

The KDB held an online press conference Thursday in what appears to be an effort to ease concerns over the deal's future and push forward the deal without delays or another rupture. 

In the conference, KDB Executive Director Choi Dae-hyon said Hanjin KAL's planned share sale to the designated party is aimed at injecting money into the cash-strapped Asiana through Korean Air by the year's end.

Under the agreement also signed with Cho Won-tae, chairman of Hanjin KAL and Korean Air, the chairman will step down if the integrated company of the two airlines reports poor earnings under his leadership, the official said. 

"Chairman Cho provided all of his (6.52 percent) stake in Hanjin KAL valued at 170 billion won as security (to creditors).

The KDB will sell the stake and have him quit the chairman position if the combined airline fails to meet expectations in terms of performance and post-merger integration," Choi said.

The KCGI, the biggest shareholder in Hanjin KAL, expressed concerns that Hanjin KAL may suffer financial damage unless the deal goes as planned. But the holding firm won't have to pay compensation for any damage under the agreement, the director said.

"In case of any (of Cho's) violations of the agreement, the KDB will have the right to sell the chairman's stake in Hanjin KAL and the Korean Air stake worth 730 billion won to be purchased by Hanjin KAL in order to pay a 500 billion-won penalty for breach of contract and other compensation," he said.

In other measures to keep the management in check, the KDB, Hanjin KAL and the chairman also agreed to not allow the chairman's family members to participate in the management of Hanjin KAL and its airline affiliates.

Under the agreement, the chairman's younger sister Cho Hyun-min is required to quit her chief marketing officer position at Hanjin KAL. But she will continue to serve as CMO at logistics affiliate Hanjin Transportation Co.

The KDB's comments come as the three-party alliance led by the chairman's elder sister Cho Hyun-ah, who gained global notoriety for the "nut rage" incident in 2014, took issue with the Asiana takeover plan.

Chairman Cho, 44, had sparred with Hyun-ah, 45, as she formed the alliance with the KCGI and local builder Bando Engineering & Construction Co. in January. The alliance argued that inviting a professional manager would improve Hanjin Group's management, financial status and shareholder value.

But the alliance failed to dethrone the chairman and has been widely expected to make another attempt at Hanjin KAL's shareholders meeting in March next year.

The alliance has recently increased its combined stake in Hanjin KAL to 46.71 percent, higher than the 41.3 percent held by Won-tae, his mother, younger sister, related parties, Delta Air Lines, Inc. and Kakao Corp., the operator of the country's leading messaging app.

To seek economies of scale, Korean Air plans to raise 2.5 trillion won via rights offerings early next year. Of the proceeds, it will spend 1.5 trillion won to buy new shares to be sold by Asiana and 300 billion won worth of Asiana perpetual bonds.

The KDB will have a 10.66 percent stake in Hanjin KAL after investing the 800 billion won in the holding firm and is widely expected to help Chairman Cho and his related parties fend off offensives from an activist fund attempting to take control of Hanjin KAL.

"The KDB will not exercise the voting rights in favor of any single party. The bank will exercise the rights in a fair and transparent manner through a committee also attended by outside experts," Choi said.

Korean Air, currently the world's 18th largest by fleet, will become Asiana's biggest shareholder with a 63.9 percent stake if the acquisition is completed.

Currently, the majority 30.77 percent stake in Asiana is held by Kumho Industrial Co., an affiliate of airline-to-petrochemical conglomerate Kumho Asiana Group.

In September, Asiana's creditors ended a drawn-out deal to sell Asiana to a consortium led by HDC Hyundai Development Co. due to differences over terms of the 2.5 trillion-won deal amid the pandemic.

Hit hard by the pandemic, Korean Air and Asiana have suspended most of their flights on international routes since March, and travel demand has dried up.

Korean Air's net losses narrowed to 651.84 billion won from January to September from 707.14 billion won in the year-ago period as it focused on winning more cargo delivery deals to offset a sharp decline in travel demand.

But Asiana's net losses deepened to 623.85 billion won from 524.14 billion won during the same period.

Korean Air and Asiana collectively have 247 aircraft, exceeding Air France's 220 but falling behind Lufthansa Deutsche Lufthansa AG's 280.

Korean Air had 22.46 trillion won in debt on assets worth 25.51 trillion won as of the end of September, while Asiana held debts worth 11 trillion won on assets worth 12.34 trillion won at the end of June.

In the process of the deal, Asiana's heavy debts remain a major worry for Korean Air.

Meanwhile, KCGI on Friday demanded that Hanjin KAL hold an extraordinary shareholders' meeting to have the current board members take responsibility for the decision to acquire Asiana and select new directors.

The fund plans to seek changes in the articles of association to improve the governance structure at Hanjin KAL at the shareholders meeting possibly to be held early next year. (Yonhap)