It has been confirmed that Jeju Air, the operator of the passenger plane involved in the Mu-an International Airport disaster, has bank borrowings amounting to 240 billion won that must be repaid within a year. Financial sources predict that not only will Jeju Air encounter difficulties in securing bank borrowings, but it will also need to repay up to 30% of the borrowing fund to the banks at maturity. Given that the disaster has raised red flags for Jeju Air's operations, it is highly likely that banks will initiate risk management.
According to Jeju Air's business report on the 30th, the company's short-term borrowings as of the end of the third quarter amounted to 242.1 billion won. Short-term borrowings refer to funds raised with a repayment term set within one year. The types of short-term borrowings include loans and the issuance of commercial paper, and all of Jeju Air's short-term borrowings consist of bank loans.
Examining the banks individually, Jeju Air borrowed 78.2 billion won from the Korea Development Bank. It then borrowed 53.9 billion won from Hana Bank and 50 billion won from Woori Bank. Additionally, it received loans of 20 billion won each from Shinhan Bank, NH Nonghyup Bank, and iM Bank (formerly Daegu Bank).
Within the financial sector, there are expectations that banks will become more stringent in lending to Jeju Air. Typically, if a corporation faces no major issues, it will frequently extend the deadline for repayment of short-term borrowings or secure funding from other financial institutions to repay the money due. In such cases, conditions like interest rates are set similarly to existing borrowing terms to minimize liability. However, if adverse circumstances arise in corporate management, financial institutions would first seek to recover a portion of the borrowing fund to gradually mitigate their risk.
A financial sector official noted, “Banks typically receive repayments of 10% to 30% at maturity from corporations facing significant operational issues and extend the difference.” They added, “However, insisting on one-time repayment from the borrowing corporations could lead to defaults, so it is likely to approach with caution.” They also mentioned, “Nevertheless, Jeju Air may face obstacles in new borrowing, as commercial banks will likely factor in the repercussions of the disaster into interest rates and other conditions when Jeju Air requests new loans.”
About a quarter of Jeju Air's total liquidity liabilities (99.37 billion won) consists of short-term borrowings obtained from banks. If the size of bank borrowings shrinks, it is anticipated that Jeju Air's overall funding and business operations will also be disrupted.
Banks holding Jeju Air bonds have not yet begun reviewing the repayment of borrowing funds. A representative from a major commercial bank stated, “We are monitoring the current situation, but since we are still in the early stages of the disaster, it is not the time to discuss loans.”