New Aspect
As some creditors of Kumho Tire refused to roll over matured debts worth over 2 trillion won (US$1.78 billion), negotiations between the Korea Development Bank (KDB) and Chinese tiremaker Doublestar on Kumho have been stopped. This is because Kumho failed to have two preconditions presented by Doublestar for the purchase – the use of Kumho’s trademark rights and extended bonds worth 2.2 trillion won (US$1.96 billion).
Moreover, the KDB is now reluctant to make a quick decision on major issues as Chairman Lee Dong-geol is highly likely to be replaced upon the launch of the Moon Jae-in administration. Considering the fact that the bank faced a strong opposition to the sale of Kumho Tire to China during the presidential election, the KDB wants to remain cautious as much as possible over the matter due to criticism and concerns over a rough-and-ready sale.
In fact, a senior official from creditors said, “We told the KDB that we don’t agree to extend the maturity of Kumho Tire’s debts for five years but we couldn’t hear from the KDB since then,” expressing concerns over the slow pace of negotiation progress. He said, “(When creditors told that we would not allow the extension of debt maturity, the bank should tell us how and when it will proceed negotiation with Doublestar. But, we couldn’t hear from the bank. It is just a short and clear issue but the KDB doesn’t make any movement.”
Some says that the KDB, which needs to negotiate with Doublestar, is now in a corner as Kumho refused to allow to use the trademark rights of the brand and creditors refused to extend the debt maturity. The KDB has proceeded negotiations with Doublestar as creditor representative, but the bank will not be able to close the deal by September 23 in which the negotiation should end, according to some industry sources. The major issues of the negotiation between the KDB and Doublestar include the use of Kumho’s trademark rights for 20 years, the extension of debt maturity worth 2.2 trillion won (US$1.96 billion) for five years and approval from the government, such as permission of business combination from the Fair Trade Commission.
However, none of them is settled. For the trademark rights, Kumho Asiana Group chairman Park Sam-koo, who owns the trademark rights, refused to share Kumho's trademark rights with Doublestar. Some creditors also opposed to the extension of debt maturity. Creditor banks insist that the extension period should be reduced to two years or Kumho Tire should repay loans as much as possible. Some also said that the KDB doesn’t’ make active move considering the new government’s cautious attitude toward the sale of Kumho Tire to a foreign company. Both President Moon Jae-in and Prime Minister candidate Lee Nak-Yeon said during the presidential election, “The bank should consider the local economy and job when making decision on the sale.” In particular, some says that the bank is holding off making a decision as senior official at the KDB is likely to be replaced upon the launch of the new government.
An official from the banking industry said, “The new government has opposed to the sale of Kumho Tire to a foreign company and head of the KDB can be changed. So, the bank is reluctant to make decision because it can be adversely affected.”
Creditors have complaints that the KDB is not actively negotiating with Doublestar and doesn’t inform Doublestar of important notices from creditors. Some even says that it would be better for the early sale when the KDB declares the failure in bidding and proceed with rebidding if the bank will proceed negotiation in this manner.
In this regard, an official from the KDB said, “We are proceeding with the sale according to steps. He said that the bank is now working on gaining approval from the government and it doesn’t seem to make any move because Doublestar doesn’t make any particular request while preparing for the acquisition. He also said, “The maturity date of the bond is coming up in late June. So, we will resume negotiations with creditors early next month. We don’t have any prpblems with concluding the deal within four months at the moment.”