Changing the Stance?
Kumho’s main creditor Korea Development Bank (KDB) on March 22 submitted for Kumho Tire’s shareholder council meeting to discuss on whether to allow Kumho Asiana Group chairman Park Sam-koo to form a consortium to purchase Kumho Tire. The state-run bank was scheduled to submit it on March 20, but the process was delayed due to additional legal review.
Investment banking industry sources say that the KDB internally may check possible problems that occur when it disapproves the formation of the consortium. This is because the possibility of approving Park’s request to establish a consortium will be thrown out owing to the creditors’ decision making process when the KDB opposes it. In order for Park’s consortium proposal to be approved, it needs more than 75 percent approval in terms of stake in the company. The KDB holds 32.2 percent voting rights, which has a decisive influence the decision.
The KDB has so far maintained its stance against the consortium formation on the grounds that Park’s right of first refusal to purchase Kumho Tire is limited to him only. Accordingly, some say that the KDB could change its stance to consider the adjustment of the initial schedule.
An official from the KDB said, “We don’t want to interrupt other creditor banks’ autonomous decision making by declaring our position on whether to allow Park to form a consortium.” Market watchers think that there’s been a slight change from the bank’s previous stance and it can approve Park’s request depending on other creditors’ reviews. In fact, the bank has faced a growing political pressure from both politicians and potential presidential candidates that called on to reconsider selling the nation’s No. 2 tire maker to a Chinese firm.
However, KDB Chairman Lee Dong-geol said, “Take care of it just based on the rules.” In particular, Lee asked not to explain and respond to Park’s arguments one by one because it can arouse another controversy. There is still much opposition in the KDB to the formation of a consortium since Park’s plan and arguments are not practical.
Others also say that the KDB is seeking to uphold its cause to avoid the corresponding responsibility as the bank believes that it cannot avoid legal battles or political controversies regardless of the outcome of the proposal submitted on the day. Each creditor will inform its decision by March 24, and the final decision is expected to come out early next week.