The long-awaited merger of three South Korean aerospace companies has finally gone ahead, with no approved business plan.

The union of Daewoo Heavy Industries (DHI), Hyundai Space and Aircraft and Samsung Aerospace into Korean Aerospace Industries (KAI) was formalised on 1 October.

The companies agreed last September to merge, under pressure from the South Korean Government as it sought wider consolidation of the country's "chaebols" (conglomerates).

The merger has gone ahead without an approved business plan after creditor banks, represented by the Corporate Restructuring Committee (CRC), twice rejected plans on the basis that they were too heavily biased towards military work and that the companies' debt-to-equity ratio is worryingly high. The KAI partners are aiming for a 164% debt-to-equity ratio, reduced from 500% because of creditors' protests.

KAI says the CRC has approved a debt transfer from the merging companies to KAI, but the company still seeks "a certain level of financial support", in the form of a $125 million debt-for-equity swap.

The new company has signed memoranda of understanding with potential foreign direct investors, including Aerospatiale Matra/ Lockheed Martin, British Aerospace, GEC and DaimlerChrysler Aerospace. The selected investor is expected to buy about 30%.

Source: Flight International