Korean Aerospace Nears End As Scandals Bite, Deliveries Halted

Korea Aerospace Industries (KAI) is the only Korean company that specializes in developing space programs and aircraft such as satellites, but its very existence is threatened as it has recently become involved in numerous scandals, from embezzlement and fraud to product malfunctions.

As a result, overseas orders are being canceled and the company is struggling to find investors. Even worse, the top CEO position, which should be managing the crisis, has been vacant for more than a month.

“There have been movements where investors have asked to return their investment as quickly as possible or said they will no longer offer loans,” said a high-ranking official at the company. “There are already talks surfacing among employees on whether the company could be faced with bankruptcy.”

The official said because the company is not a conglomerate with subsidiaries that could provide needed capital, it is having trouble securing the necessary funding. Prosecutors raided the company’s headquarters in South Gyeongsang province and its office in Seoul last month, as the company was suspected of inflating the cost of the Surion, a utility helicopter, for illicit gains.

A week after the raid, the company’s CEO Ha Sung-yong resigned. Since then, the seat has remained vacant.

The company is also accused of manipulating its accounts, which surfaced during the investigation by the Financial Supervisory Service. The Korean credit rating company NICE Investors Service said it has listed KAI for a possible downgrade. As of Aug. 21, the balance on the company’s corporate bond is 600 billion won ($533 million) and commercial paper is 350 billion won.

“In order for the company to pay off investors, it will need to resolve the uncertainty related to the prosecutors and the financial authorities’ investigations,” said Kim Sang-hoon, an analyst at Shinhan Investment Corp.

In fact, since the investigation, all Surion deliveries and exports scheduled for the second half have come to a halt. The company’s stock, which was worth more than 70,000 won per share earlier this year, has plummeted to 43,350 won. The corruption scandal is also expected to harm the company’s pursuit of a 38 trillion won U.S. Air Force contract to replace 350 outdated training jets. (end of excerpt)

Click here for the full story, on the Joongang Daily website.

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