S.Korea's Asiana fails to get accounting sign-off; shares suspended (updated)
22/03/2019 04:08
* Auditor says lacked information on provisions, investments
* Trading to resume on Tuesday; stock could be put on watch
list
* Moody's considers credit rating downgrade
(Adds parent's auditor, comments from the bourse and Moody's,
efforts to improve finances)
By Heekyong Yang and Hayoung Choi
SEOUL, March 22 (Reuters) - South Korea's second-biggest
carrier Asiana Airlines Inc 020560.KS said on Friday an
independent auditor has not signed off its 2018 financial
statements due to a lack of information, rendering its stock at
risk of being added to a watch list.
The refusal also meant the auditor for Asiana's biggest
shareholder, Kumho Industrial Co Ltd 002990.KS , was only able
to provide a qualified opinion on the parent's 2018 accounting,
leaving the logistics conglomerate in a cloud of uncertainty.
The Korea Stock Exchange suspended trading of shares in the
pair from Friday and asked Asiana to clarify market rumours
about its auditor's review.
Shares of maintenance affiliate Asiana IDT Inc 267850.KS
subsequently fell as much as 12.2 percent in a flat market, and
budget affiliate Air Busan Co Ltd 298690.KS lost 2.6 percent.
In a qualified opinion - or statement addressing an
incomplete audit - Asiana's auditor Samil PwC said it had not
been provided with enough information to evaluate the airline's
provisional debt related to maintenance of leased aircraft, as
well as the fair value of stakes in affiliates bought in 2018.
"As a result, we were not able to decide whether adjustments
would need to be made to certain financial accounts," it said.
Asiana Airlines and Kumho Industrial in separate statements
said they would call on auditors to reach a swift resolution.
The bourse said trading will resume on Tuesday. If the pair
have not received auditor approval by then, their stocks will be
added to a watch list. That would likely deter investment from
large institutional investors and benchmark-tracking funds.
"If the auditors issue further qualified opinions next year,
the companies' stocks could face possible delisting, and trading
in the stocks would be halted while the bourse conducts
reviews," a stock exchange official told Reuters.
The qualified opinion comes as Asiana sells assets to
improve cash flow and reduce debt from aircraft purchases, as it
battles rising fuel costs and competition with budget carriers.
Asiana, a member of the STAR alliance that includes Air
Canada AC.TO and Air China Ltd 601111.SS , sold its stake in
CJ Logistics Corp 000120.KS last year, while its parent sold
its headquarters in central Seoul. urn:newsml:reuters.com:*:nS6N1P5026 urn:newsml:reuters.com:*:nS6N1R203W
"We can't rule out the possibility of liquidity risks
growing, as this undermines the credibility of its accounting
information, and therefore its access to the capital market,"
Moody's Investor Service's South Korean unit wrote in a note,
saying it will consider lowering its rating of Asiana's credit.
Asiana on Friday said it swung to a net loss of 106.6
billion won ($94.39 million) last year, with debt equivalent to
over seven times its equity.
($1 = 1,129.4100 won)
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S.Korea's Asiana Airlines to sell headquarters building for $386
mln urn:newsml:reuters.com:*:nS6N1R203W
S.Korea's Asiana Airlines in talks to sell Seoul headquarters
building - parent group urn:newsml:reuters.com:*:nS6N1P5026
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(Reporting by Heekyong Yang and Hayoung Choi; Additional
reporting by Yuna Park and Hyunjoo Jin; Editing by Christopher
Cushing and Miyoung Kim)
((Heekyong.Yang@thomsonreuters.com; +82 2 3704 5647; Reuters
Messaging: heekyong.yang.thomsonreuters.com@reuters.net))