Korean Air eyes sale of Wilshire Grand

Debt-ridden airline lends subsidiary nearly $1B to refinance maturing loan on LA’s tallest tower

TRD LOS ANGELES /
Sep.September 17, 2020 11:45 AM
 Korean Air chairman and CEO Walter Cho Won-tae and the Wilshire Grand Center at 900 Wilshire Boulevard (Credit: Jae Joon Lee via Wikipedia and Fredchang931124 via Wikipedia)
Korean Air chairman and CEO Walter Cho Won-tae and the Wilshire Grand Center at 900 Wilshire Boulevard (Credit: Jae Joon Lee via Wikipedia and Fredchang931124 via Wikipedia)

The tallest skyscraper west of the Mississippi may soon be up for sale, as the Korean conglomerate that owns it struggles to shore up its finances.

Korean Air is in talks with investors regarding a possible sale of the 73-story Wilshire Grand Center in Downtown Los Angeles, the Korean Economic Daily reported, citing industry sources.

The property was facing a $900 million debt maturity this month. On Wednesday, Korean Air’s board decided to lend $950 million to Hanjin International, the subsidiary that owns the mixed-used tower, in order to refinance the debt and sustain hotel operations hurt by the coronavirus, according to a local stock exchange disclosure.

A $300 million piece of that loan is expected to come from the Export-Import Bank of Korea, while the remaining $650 million will be funded by Korean Air itself. The bank loan will have a term of two years, while the company’s own loan is set to be paid off in one year.

According to local media reports, creditor approval for the new financing was conditioned on the airline moving forward with a sale of the property. Korean Air is also in talks with a U.S. investor to sell a stake in Hanjin International, which together with a bridge loan would generate another $300 million for the firm.

The sales process for Wilshire Grand is expected to kick off when business conditions for the 889-room InterContinental hotel improve.

A representative for Korean Air said the firm has not “discussed the sale of the Wilshire Grand,” but confirmed it was in talks to sell a stake in Hanjin International to unidentified investors. “The company is having difficulties refinancing due to a sharp drop in demand for hotels and offices caused by the Covid-19 pandemic,” the airline said in a statement.

The tower, which opened its doors in 2017, was developed at an estimated cost of $1.2 billion. In addition to the hotel, the building includes 677,000 square feet of office space and 67,000 square feet of retail space. Korean Air’s latest annual report values the Hanjin International subsidiary at $914.4 million.

Like most airlines, Korean Air has taken a hit from a drastic decline in air travel in recent months, but its problems — and those of its parent conglomerate Hanjin Group — predate the pandemic. The group’s former chairman Cho Yang-ho died early last year, leading to a messy family feud among his children over control of the company.

Cho’s elder daughter Heather attracted international notoriety in 2014 with the so-called “Nut Rage” incident, after she ordered a Korean Air flight to return to the gate at New York’s John F. Kennedy International Airport because of the way a flight attendant served nuts. Cho’s only son Walter is now the group’s chairman and CEO.

Heather Cho joined forces with an activist investor, Korea Corporate Governance Improvement Fund, in an attempt to seize control of the company earlier this year, but those efforts have so far been rebuffed. The activist fund had also pushed for a sale of the Wilshire Grand, noting in promotional material that the property has “no or low synergy with [the] aviation industry” and “suffer[s] from chronic losses.”






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