South Korea’s second largest tire maker Kumho Tire Co. goes under creditors’ management and debt relief to seek business turnaround after its much-delayed sale to a Chinese rival fell through.
Kumho Tire’s main creditor Korea Development Bank (KDB) and other creditor banks questioned the feasibility of the self-rescue plan handed in by the management that failed to specify how it planned to raise 630 billion won ($554 million) to pay back lenders and make necessary investment.
Kumho Tire’s losses have been snowballing as it lost customers due to uncertainties about its outlook once it goes under Doublestar Tyre of China, which until last year fell behind the Korean company in manufacturing capacity and global sales rank.
Finding the self-rescue plan undesirable, creditors decided to restructure the company’s debt to offer moratorium while the company gets back on its feet. Because the workout is not legally binding, Kumho Tire won’t have to fret about bond rating downgrades and losing customers.
Kumho Asiana Group Chairman Park Sam-koo
The company’s bonds worth 1.3 trillion won are due by the end of this month.
Kumho Asiana Group Chairman Park Sam-koo offered to give up his right to buy back the company as well as his management right to help normalize the tire company under creditors’ management. The parent group also will allow permanent use of Kumho trademark, which had been used as a stumbling block in the sale to the Chinese bidder.
Details of the workout plan will come out next month after fresh due diligence.
Shares of Kumho Tire finished Tuesday at 5,280 won, up 6.24 percent from the previous session.
By Chung Seok-woo
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]