Kumho chair makes last pitch to keep tire unit

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Kumho chair makes last pitch to keep tire unit

Kumho Asiana Group Chairman Park Sam-koo made his final pitch to Kumho Tire’s main creditor Korea Development Bank, saying he would give up management rights of the tire unit should his submitted turnaround plan fail.

According to Park on Thursday, the group submitted a plan to generate a fresh 200 billion won ($176.7 million) in paid-in capital and sell off stakes of the tire company’s Chinese corporations to the bank on Tuesday.

However, the bank hasn’t approved Park’s rescue plans and requested an amendment to the plan to make it more clear and realistic.

Park responded by announcing that he will give up management rights and his right to make the first purchase of the company if his proposed turnaround measures are unsuccessful.

“If our creditors give approval, we will sell stakes of our Chinese corporations and turn them into a joint venture with other investors by March next year,” the group said in a statement. “We are already in talks with multiple interested investors.” The sale of Chinese corporations, which operate three factories in Nanjing, Tianjin and Changchun, is expected to raise a maximum 400 billion won, according to industry analysts.

As for paid-in capital increase, the group said it will source capital from a private equity fund to keep sound liquidity of group affiliates. There were concerns from creditors that sourcing money from Kumho Asiana Group affiliates such as Kumho Industrial and Asiana Airlines for the paid-in capital increase could harm group wide financial stability.

Other measures included in the turnaround plan, according to industry sources, are laying off staff other than production workers and selling a 4.4 percent stake in Daewoo Engineering and Construction, which is worth about 130 billion won.

The tire maker faces an imminent liquidity crisis, posting a 50.7 billion won operating loss during this year’s first half after making 55.8 billion won operating profit in the first six months of last year.

Still, despite the bold pitch from Park, creditors remain unsatisfied with the group’s moves.

“We are still looking through the proposed turnaround measures but they are mostly vague and unrealistic,” a source from Korea Development Bank said. “As for selling the 4.4 percent stake in Daewoo, it is an unrealistic proposal because the stake is already held by creditors as collateral.”

Creditors will review the revised turnaround plan from Kumho this week and meet next week to decide on whether to approve the plan.

If the creditors approve, Park will keep control over Kumho Tire, but if they do not accept his proposal he could lose control and the company may fall under a corporate workout program.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]
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