Kumho Tire Co.'s creditors said Friday they aim to sell the financially troubled company to Qingdao Doublestar Co. through a rights issue, as attracting investment from the Chinese tiremaker may be the best option at present.
The state-run Korea Development Bank (KDB), the main creditor, held talks with Doublestar as it believes new capital injection will help creditors suffer less losses from investments in Kumho Tire as well as help the tiremaker develop new technology and improve product quality, the policy lender said in a statement. The move comes after a failed attempt to sell the tiremaker to Qingdao Doublestar last year.
"Creditors will have to inject a massive amount of fresh capital into Kumho Tire for a turnaround if they push forward a joint restructuring program. But it won't guarantee a turnaround for the company's businesses, including the loss-making Chinese unit," KDB Vice Chairman & Chief Operating Officer Lee Dai Hyun said at a press conference.
Given the conditions, creditors have decided that attracting investment from Doublestar is the "most reasonable alternative" for now, Lee said.
|In this photo taken on March 2, 2018, KDB Vice Chairman & Chief Operating Officer Lee Dai Hyun delivers a briefing on creditors' plan to sell the financially troubled Kumho Tire Co. to China's Qingdao Doublestar Co. (Yonhap)|
In its proposal, Doublestar said it will invest 646.3 billion won (US$599 million) in Kumho Tire's new shares, which will allow the Chinese tiremaker to become the biggest shareholder with a stake of 45 percent, the statement said.
If the rights issue is successful, KDB-led creditors will collectively own a 23.1 percent stake in Kumho Tire, it said.
On top of the capital injection into Kumho Tire's new shares, Doublestar said it will invest 200 billion won in the tiremaker's production facilities, with a guarantee of job security for existing union workers for three years after taking control of management, the KDB said.
Under the potential deal, which requires the cooperation of the union and the government's approval, Doublestar and creditors are prohibited from selling their stakes in Kumho Tire for three and five years, respectively, after the management transfer, a KDB spokesman said over the phone.
"Creditors called on the union to decide on whether to accept Doublestar's investment proposals or not by the end of March. If the union refuses to accept the offerings, the tiremaker will have to be placed under a court receivership," he said.
In a statement released Friday, Kumho Tire's 3,000-strong union said it will stage an unyielding fight against the company and creditors seeking to sell the tiremaker to a foreign firm.
The union will not end the protest until creditors withdraw all plans to sell Kumho Tire to the foreign company, a union spokesman said.
In March last year, Qingdao Doublestar signed a 955 billion won contract with the KDB-led creditors to buy a 42.01 percent stake in the Korean tiremaker.
The deal, however, was scrapped in September when creditors rejected Doublestar's demand to cut the purchase price by 16 percent to 800 billion won, citing deteriorating earnings.
Kumho Tire, which earns about 22 percent of its sales from North American operations, opened its first U.S. plant with an annual capacity of 4 million units in Georgia last year. Its global capacity stands at 65 million tires per year. (Yonhap)
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