Korean Air (KE, Seoul Incheon) parent Hanjin KAL has sold KRW300 billion won (USD249.5 million) worth of bonds with attached warrants, garnering what it called an overwhelming response, the Maeil Business Newspaper reported.

The news about the success of the non-guaranteed convertible bond has raised expectations for strong support for the company's USD800 million recapitalisation scheme, the newspaper said.

The BBB- three-year bonds with warrants - a sweetener giving investors the right to buy shares - attracted KRW7.34 trillion (USD6.12 billion). It was oversubscribed by 24.45 times, the sale's Seoul-based advisor Eugene Investment & Securities said on July 1.

The yield was set at a relatively high annual rate of 3.75% if held until their maturity. If not, the interest is 2%.

It offered 23,779,196 shares at KRW82,500 (USD68.78), a slight discount from the stock's actual price, for which investors can exercise their warrants starting from August 3.

However, institutional investors were reportedly reluctant to join in the process because of the company's low credit rating and what they considered to be a relatively high stock price in contrast to the company's fundamentals.

The three-way shareholder alliance of Hanjin KAL heiress and former Korean Air vice president Cho Hyun-ah, activist fund Korea Corporate Governance Improvement (KCGI), and Bando Construction, reportedly took part in the measure. But it was not immediately clear whether allies of the conglomerate's leadership headed by Cho's younger brother and rival Cho Won-tae also took part.

Nevertheless, "although there is a dispute over management rights at Hanjin KAL, investors judged that they would be able to make stable profits with warrants and corporate bonds," an unnamed investment analyst told the magazine BusinessKorea.

In related news, the government-owned asset management company Korea Asset Management Corp (KAMCO) may buy Korean Air aircraft and real estate as a means of providing liquidity to the airline, BusinessKorea reported.

KAMCO would issue its own bonds to raise KRW2 trillion (USD1.67 billion) in funding needed for a broad corporate asset purchase programme to be launched sometime in July, aimed at helping companies like Korean Air that are struggling with the Covid-19 crisis.

Korean Air is also reportedly considering selling off its pilot flight training centre to raise funds, once the planned selloff of its inflight catering business takes place, a move it decided to press ahead with in early June.