Trademark Negotiation
Kumho Tire creditors, which have had disputes over the use of the trademark rights to Kumho Tire, have decided to make a final modified offer to Asiana Group Chairman Park Sam-koo.
According to creditors on June 25, Kumho Tire's main creditor Korea Development Bank (KDB) is planning to hold its shareholders’ meeting on the 27th or 28th and decide on final conditions on the use of Kumho trademark as soon as it finishes discussion with Doublestar. For a prerequisite to end the sale, Doublestar requested a term of 20 years – the first five years of the mandatory period of the Kumho trademark use and additional 15 years of the voluntary period – as well as the right to cancel the trademark use anytime and 0.2 percent of Kumho Tire's annual sales as brand royalties. However, Chairman Park said that Chinese firm should pay 0.5 percent in brand royalties for 20 years and cannot unilaterally cancel use of the trademark during that time. In this regard, the creditors urged Park to accept Doublestar’s request but Park refused it. Accordingly, the creditors are expected to come up with a final offer revised on both the period of the trademark use and percentage in brand royalties.
However, there is doubt whether the creditors will be able to come up with revisions that cater for Park. He wants Doublestar to pay 0.5 percent of Kumho Tire's annual sales as brand royalties, which is 2.5 times higher than Doublestar’s request. So, the creditors consider it an unreasonable demand as well as 20 years of the mandatory period of the Kumho trademark use. The creditors plan to send notification on new conditions to Park after holding its shareholders’ meeting and request his reply by the 30th or July 3.
The creditors are also considering a plan to make up for the difference of royalty rates between Doublestar and Kumho Industrial by adjusting loan interest rates if Park rejects a revised offer. Kumho Tire pays 100 billion won (US$87.83 million) to its creditors every year for interest alone so the creditors can make up 9 billion won (US$7.91 million) of money equivalent to the difference of annual royalties between the two sides by slightly lowering interest rates on its loans.
In addition, the creditors will come up with fallback at the shareholders’ meeting in case the sale of Kumho Tire falls through. Previously, they announced its decision to deprive Park of his right of management and first refusal for Kumho Tire for his poor management.
Since the creditors are the largest shareholders of Kumho Tire, they can ask Park to step down from his post as Kumho Tire co-CEO. However, the deprivation of his right of first refusal for Kumho Tire is a controversial issue. His right of first refusal is granted by agreement of the creditors and Park. Park argues that the creditors have no legal ground to take away his right of first refusal.