Asiana Airlines liquidity at risk on junk rating warning

Bloomberg

Concern about Asiana Airlines’ liquidity is rising after two rating firms warned its debt score may be cut to junk due to a lack of transparency in its 2018 financial report.
The South Korean carrier’s BBB- rating, the lowest investment-grade level, was put on negative review by both Korea Investors Service and NICE Investors Service after Asiana got a “qualified” opinion for its annual report from its auditor, Samil PricewaterhouseCoopers.
The problem is that most of the carrier’s asset-backed securities and some of its long-term debt include a stipulation that will force it
to make an early repayment in the event its rating is cut by one level to speculative grade. At the end of last year, Asiana had about 1.1 trillion won ($969 million) of ABS and 258 billion won of long-term debt that included the trigger, according to Mirae Asset Daewoo Co.
Asiana, Korea’s second-largest airline, faces “material uncertainty” in its business, with its current liabilities surpassing current assets by 1.8 trillion won at the end of 2018, according to Samil PricewaterhouseCoopers’s review.
Full-service airlines such as Asiana have been hurt by competition from low-cost carriers as well as fluctuations in oil prices and currency exchange rates.
Samil PricewaterhouseCoopers cited a lack of details on provisions for leasing aircraft and the value of some assets, as well as financial information for Air Busan, a Korean budget airline in which Asiana has a 44.17 percent stake.
Asiana will seek another audit as soon as possible to get an “unqualified” opinion, a spokesperson said.