Kumho group promises to end tire unit's credit crisis by next March

By Lim Chang-won Posted : September 14, 2017, 15:40 Updated : September 14, 2017, 15:40

[Courtesy Kumho Tire]


The operator of South Korea's second flag carrier, Asiana Airlines, made a fresh pledge to take its hands off the process of selling Kumho Tire if it fails to normalize the operation of the troubled tire maker through a self-rescue package submitted to creditors.

The pledge comes amid growing doubts over the self-rescue plan presented by Kumho Asiana Group chairman Park Sam-koo this week that followed a broken deal between creditors and China's Doublestar. Creditors have failed to skim Park's influence from Kumho Tire and put it under a new and financially sound owner. 

The group said in a statement that it would completely give up its right to buy back and regain the management of Kumho Tire unless it escapes from a credit crisis through asset sales and capital increase by March next year.

Kumho Asiana promised to issue new shares through private equity funds by the end of this year. The group said it's in talks with potential investors to sell a stake in assets in China by March next year.

The group reportedly hopes to raise some 630 billion won (557 million US dollars), including the sale of a 4.4 percent stake in Daewoo Engineering & Construction for 130 billion won, a capital increase worth 200 billion won and the disposal of assets in China.

Creditors have expressed doubts about the group's financial ability to bail out the tire unit saddled with a total debt of 2.7 trillion won.

Doublestar agreed in March to secure a 42.01 percent stake in Kumho Tire for 955 billion won, but the deal faltered because of disputes over job security, the use of Kumho's brand and other thorny issues. Creditors rejected a requested price cut by 16 percent to 800 billion won and warned of court receivership.

Kumho Tire with plants in China, Vietnam, and the United States was put under a debt workout program in December 2009 due to a severe liquidity crunch. The company graduated from the program in late 2014, but sales fell sharply in China this year amid a row over a US missile shield.

Park has been accused of causing Kumo Tire's liquidity crisis with mismanagement. However, community people have supported Park's claim that the country's second-largest tire maker should not be turned over to a foreign company especially from China.

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