Kumho Tire to undergo stringent restructuring

The Korea Times

The Korea Times

Business

Fri, December 8, 2023 | 04:29

Companies

Kumho Tire to undergo stringent restructuring

Posted : 2017-09-07 16:32

Updated : 2017-09-07 17:50

Park Sam-koo
Kumho Asiana Group chairman

By Lee Hyo-sik

Kumho Tire will likely undergo stringent restructuring as the head of Kumho Asiana Group vows to take all possible measures to get the struggling tire maker back on track.

Kumho chief Park Sam-koo said he will mobilize all available resources to normalize its operations, in response to requests from the state-run Korea Development Bank (KDB) and other creditors to draw up a self-rescue plan.

The creditors, which failed to sell Korea's second-largest tire maker to mid-tier Chinese tire maker, Double Star, have threatened to take away managerial control from Park if he fails to produce effective self-rescue measures.

"Regardless of what the reason may be, I feel responsible for Kumho Tire's worsening performance," he told reporters earlier this week. "I am sorry to trouble creditors and Kumho employees. I will think of all possible measures to help normalize the company. I will prepare to meet the requests (from creditors)."

Park said he would consider selling the firm's China business, which has been struggling amid worsening Sino-Korea ties in recent months. He is also reportedly mulling issuing a new rights offering to raise fresh capital.

On Tuesday, the banks decided not to accept Double Star's demand that they slash the sales price by 16.2 percent to 800 billion won ($710 million).

The Chinese company also asked them to cut the price by an additional 80 billion won if Kumho Tire posts an operating loss in the third quarter. 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 a year ago.

In March, Double Star signed an agreement with Kumho tire creditors to buy a 42.01 percent stake for 955 billion won.

Instead of accepting "excessive" demands from Double Star, the creditors chose to first restructure the struggling tire maker to raise its corporate value and dispose of its stakes later, according to industry analysts.

Many creditors view Park as the main culprit behind the botched deal because he made it difficult for Double Star to use the Kumho trademark after acquiring the tire maker, they said.

To appease hostile creditors, Park has to draw up and submit a viable restructuring plan by Sept. 12. Otherwise, they would strip him and his associates of managerial control of Kumho Tire and subject it to a workout program by threatening not to extend the firm's 1.3 trillion won in loans, which will mature by the end of this month.

While citing reasons for creditors' failure to dispose of their Kumho stakes, KDB Chairman Lee Dong-geol said the bank and other creditors are extremely reluctant to extend Kumho's maturing loans. He stressed it is Park's job to persuade them by submitting a viable and effective self-rescue plan.

leehs@ktimes.com