Creditors take over control of Kumho Tire

Creditors of Kumho Tire decided to reject a turnaround plan submitted by the company earlier this month. Instead, a group of creditors led by the state-run Korea Development Bank will take control of the effort to rescue the beleaguered tire company.

“Considering various factors such as the [possible] effectiveness and the feasibility of the turnaround plan presented by Kumho Tire, [the creditors] have decided it may be insufficient to resolve the management crisis the company is facing today,” said the state-run bank through a statement on Tuesday. “As a result, [the creditors] have agreed to proceed with a creditor-led normalization plan.”

Doublestar, a Chinese tire maker who was named preferred bidder to buy the cash-strapped tire company, dropped its bid on Sept. 12. The company feuded with Kumho Asiana Group, former owner of the tire company and the de facto holding company of the Kumho group, and its chairman Park Sam-koo over trademark usage fees for Kumho.

After Doublestar walked away, Kumho Asiana Group and Park submitted a turnaround plan to creditors.

Kumho Asiana Group lost control of the tire company in 2009 after filing for a debt workout program due to a severe liquidity crunch.

Park has been delegated with management of Kumho Tire since the company began the workout program in 2010.

The plan submitted by Park and the group was worth some 600 billion won ($528 million), which included raising 200 billion won in paid-in capital and 400 billion won through selling its stakes and assets in China. While sales from China once made up more than 30 percent of Kumho Tire’s total global sales, that figure has been slashed to around 10 percent as of the first half of this year.

With creditors turning down the turnaround plan, Park will be ousted from management.

“Chairman Park and the current management has decided to resign,” said the state-run bank through a statement. “[Chairman Park] has also decided to forgo his right of first refusal [which gives him the priority right to buy back the company].”

As a result of the decision, the creditors will convene for a meeting to decide the details of the restructuring program. If all creditors fail to agree on the details of the plan, Kumho Tire is likely to return to the debt workout program from which it graduated three years ago.

BY CHOI HYUNG-JO [choi.hyungjo@joongang.co.kr]