Creditors regroup as Kumho Industrial sale fails

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Creditors regroup as Kumho Industrial sale fails

The sale of Kumho Industrial is back to square one after creditors late Tuesday decided not to name sole bidder Hoban Construction as the primary negotiator.

Main creditors Korea Development Bank (KDB), Nonghyup Bank, Woori Bank, KB Kookmin Bank, Daewoo Securities and Mirae Asset Securities met in Yeouido, Seoul, four hours after the 3 p.m. deadline for bids for a majority stake of affiliate that is a de facto holding company for the nation’s second-largest airline conglomerate, Kumho Asiana Group.

The creditors decided the Hoban Construction bid, reportedly 600.7 billion won ($560.4 million) for a 57.48-percent stake in Kumho Industrial, was too low. The market projected that the bidding price would be between 600 billion won ($561 million) and 1 trillion won. The stake of Kumho Industrial up for sale Tuesday was estimated to be worth 454.7 billion won considering shares closed at 22,850 won. Kumho Industrial’s stock plummeted almost to the daily limit at 13.35 percent on Wednesday to close at 19,800 won. Under the new price the value of the stocks for sale would be worth 394 billion won.

“We did our due diligence on Kumho Industrial and we proposed the price to the creditors that we considered appropriate,” said a Hoban Construction official, who asked not to be named.

Creditors will hold another meeting May 5 to discuss a second bidding process for Kumho Industrial.

They can either try to find another buyer or negotiate with Kumho Asiana Group founding family and Chairman Park Sam-koo, who would have the right to buy the shares at the price offered by a potential buyer.

Finding a new buyer wouldn’t be easy. When creditors accepted lists of interested parties in February, there were several besides Hoban Construction, including consortiums and private equity funds such as IBK Securities-Keistone Partners, Jabez Partners, MBK Partners and IMM. Shinsegae Group, the nation’s leading retail giant, showed interest when Kumho Industrial was put up for sale in January, but pulled out at the last minute.

The likely scenario at this point is for Chairman Park to buy back what was once his, even though doesn’t have sufficient capital. Because creditors have made it clear they aren’t satisfied with 600 billion won, the proposed price would have to be much higher. Park controls a 10.15 percent combined stake in Kumho Industrial, including the 5 percent owned by his son and Kumho Tire Vice President Park Se-chang. He needs 40 percent to regain his control of the company. The chairman would need at least 274.1 billion won to buy back Kumho Industrial, as of Wednesday’s value.

However, Park already spent 300 billion won of his own money when he filed for a workout of Kumho Industrial and Kumho Tire in early 2012.

Kumho Industrial has a crucial role in the governance of Korea’s 17th-largest conglomerate with 26 affiliates. The de facto holding company owns 30.8 percent of the group’s flagship Asiana Airlines and 100 percent of other affiliates, including Kumho Terminal, Asiana Airport Development and Asiana IDT.

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