By Lee Hyo-sik
Creditors' efforts to dispose of Kumho Tire are back at square one as the Chinese preferred bidder is refusing to pay the initial sales price for the struggling tire maker.
Double Star Tire is demanding creditors slash the price by 16.2 percent to 800 billion won, citing Kumho's poor performance in the first half of the year. In March, it signed an agreement with the Korea Development Bank (KDB) and other creditors to buy a 42.01 percent stake for 955 billion won ($838 million).
Under the contract, the mid-tier Chinese tire maker could cancel the transaction if Kumho Tire's operating profit falls more than 15 percent by Sept. 23, when the deal is to be finalized.
Creditors are widely expected to accept Double Star's demand because if they don't, the deal will fall apart.
When they sign a new stock purchase agreement (SPA), the banks will have to notify Kumho Asiana Group Chairman Park Sam-koo of the sales price and other conditions, giving him one more chance to exercise his buyback right.
Once notified, Park will have to let creditors know within 30 days whether he will pay a higher price or give up his right.
According to Kumho Tire creditors Sunday, they will hold a meeting Tuesday to discuss whether to lower the sales price for the 42.01 percent stake to 800 billion, as requested by Double Star.
In the first six months of 2017, Korea's second-largest tire maker posted a 50.7 billion won operating loss, compared with a 55.8 billion won operating profit in the same period last year.
Under the SPA, the firm's poorer-than-expected performance enables the Chinese firm to call off the agreement. But instead, it decided to ask creditors to lower the sales price.
The banks will likely accept Double Star's request and sign a new SPA. They will then ask Kumho chief whether he is willing to pay more than 800 billion won for the 42.01 percent stake.
"We haven't been contacted yet by creditors," a Kumho Asiana official said. "When we hear from them, we will consider whether to exercise the buyback right or not."
Early this year, Park had to give up his buyback right because creditors did not allow him to acquire the 42 percent stake by forming a consortium with financial investors and other companies.
The chairman had to mobilize his personal funds but was short of cash after spending tens of billions of won buying back control of Kumho Industrial and increasing shares in other group units.
But this time, Park will put more pressure on creditors to allow him to form a consortium, according to an industry analyst familiar with the matter.
"Park will take all possible means to force the banks to permit him to acquire the stake through a consortium," the analyst said. "He is determined to take back control of Kumho Tire because it is the last remaining piece to rebuild his fallen empire."
He said creditors will face greater pressure this time to treat Park and Double Star the same.
"Last time, the Chinese firm was allowed to set up a consortium but Park wasn't. Creditors are also facing mounting pressure from politicians and employees not to sell Kumho Tire to Double Star. I think Park will be allowed to acquire the stake jointly with other entities," the analyst said.
Over the past few months, the SPA between creditors and Double Star has remained in a stalemate as Kumho Asiana Group continues to take issue with the Chinese tire firm's use of Kumho brand.
Kumho workers, residents of Gwangju, where the company's main plant is located, and local politicians have been protesting against the sale to the Double Star.
Creditors' efforts to dispose of Kumho Tire are back at square one as the Chinese preferred bidder is refusing to pay the initial sales price for the struggling tire maker.
Double Star Tire is demanding creditors slash the price by 16.2 percent to 800 billion won, citing Kumho's poor performance in the first half of the year. In March, it signed an agreement with the Korea Development Bank (KDB) and other creditors to buy a 42.01 percent stake for 955 billion won ($838 million).
Under the contract, the mid-tier Chinese tire maker could cancel the transaction if Kumho Tire's operating profit falls more than 15 percent by Sept. 23, when the deal is to be finalized.
Creditors are widely expected to accept Double Star's demand because if they don't, the deal will fall apart.
When they sign a new stock purchase agreement (SPA), the banks will have to notify Kumho Asiana Group Chairman Park Sam-koo of the sales price and other conditions, giving him one more chance to exercise his buyback right.
Once notified, Park will have to let creditors know within 30 days whether he will pay a higher price or give up his right.
According to Kumho Tire creditors Sunday, they will hold a meeting Tuesday to discuss whether to lower the sales price for the 42.01 percent stake to 800 billion, as requested by Double Star.
In the first six months of 2017, Korea's second-largest tire maker posted a 50.7 billion won operating loss, compared with a 55.8 billion won operating profit in the same period last year.
Under the SPA, the firm's poorer-than-expected performance enables the Chinese firm to call off the agreement. But instead, it decided to ask creditors to lower the sales price.
The banks will likely accept Double Star's request and sign a new SPA. They will then ask Kumho chief whether he is willing to pay more than 800 billion won for the 42.01 percent stake.
"We haven't been contacted yet by creditors," a Kumho Asiana official said. "When we hear from them, we will consider whether to exercise the buyback right or not."
Early this year, Park had to give up his buyback right because creditors did not allow him to acquire the 42 percent stake by forming a consortium with financial investors and other companies.
The chairman had to mobilize his personal funds but was short of cash after spending tens of billions of won buying back control of Kumho Industrial and increasing shares in other group units.
But this time, Park will put more pressure on creditors to allow him to form a consortium, according to an industry analyst familiar with the matter.
"Park will take all possible means to force the banks to permit him to acquire the stake through a consortium," the analyst said. "He is determined to take back control of Kumho Tire because it is the last remaining piece to rebuild his fallen empire."
He said creditors will face greater pressure this time to treat Park and Double Star the same.
"Last time, the Chinese firm was allowed to set up a consortium but Park wasn't. Creditors are also facing mounting pressure from politicians and employees not to sell Kumho Tire to Double Star. I think Park will be allowed to acquire the stake jointly with other entities," the analyst said.
Over the past few months, the SPA between creditors and Double Star has remained in a stalemate as Kumho Asiana Group continues to take issue with the Chinese tire firm's use of Kumho brand.
Kumho workers, residents of Gwangju, where the company's main plant is located, and local politicians have been protesting against the sale to the Double Star.
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