Sell-off of Kumho Tire Expected to Reach Watershed Next Week

A confrontation over the use of the trademark right between creditors and Kumho Asiana Group chairman Park Sam-koo, which is the biggest issue of selling off Kumho Tire, is entering the homestretch. Chairman Park should clarify his final position on the creditor's revised proposal by July 18.

According to industry sources on July 16, Kumho Industrial, which owns the trademark right of Kumho Tire, will hold a board meeting on July 18 to discuss whether or not it will accept the Korea Development Bank’s proposal about the terms of use of the trademark. If Park rejects even the creditor's revised proposal, the creditors are expected to begin legal proceedings to deprive chairman Park of his management right and right of first refusal for the Kumho Tire sales.

Inside and outside creditors, a dominant view is that Park is unlikely to fully accept the revised proposal from creditors. "The proposal by the creditors is close to the 20-year mandatory use and the 0.5 percent license fee rate set by Park. However, chairman Park seems unlikely to accept the proposal," said a representative of the creditors. “In the first place, the negotiation over the trademark was not a problem of each of conditions but whether or not chairman Park had the will to agree on Kumho Tire’s sale to Double Star."

The Park’s position is reflected by the fact that recently chairman Park visited some creditor banks one by one and told them that he will take some responsibility by selling the Chinese business and taking part in capital increase with consideration if the sell-off is aborted.

During the meetings with the creditor bank, chairman Park came up with the concrete proposal to sell off both the creditors’ stake and the stake of the increased paid-in capital that would be secured by raising 100 billion won (US$90 million) to 400 billion won (US$360 million) through a sell-off of the Chinese business under the condition to guarantee sales for a certain period of time by allowing the use of technology and brand, and by receiving 200 billion won (US$180 million) worth investment from investors friendly with chairman Park. 

However, as its subsidiary in China is seriously damaged, a possibility of its sell-off is quite slim. The creditors judge that even if the sale is made, it will be inevitable that the financial structure of the Chinese subsidiary will deteriorate due to the borrowings reaching 620 billion won (US$558 million), the creditors’ additional support burden resulting from the cuts of 100 billion won (US$90 million) in loans, and the losses of the mother company.

The creditors believe that if the sell-off of Kumho Tire fall apart due to chairman Park’s refusal to allow the use of the trademark, a possibility of a sale through a competitive bidding will weaken and finally, it will be inevitable for the company to go through one more workout and be sold off at a low price by way of a private contract with chairman Park.

It is predicted that if chairman Park does not cooperate for the use of the trademark right in his final answer, the creditors will hold a shareholders' council meeting as they have professed, and will enter into legal proceedings to strip chairman Park of his management right and the first refusal right. The move is expected to begin with creditors filing an application for the permission to convene a temporary shareholder meeting for the dismissal of directors to the court.

"The main purpose of the workout is for the creditors to raise the loan collection rate," said a representative of the creditors. "It will be inevitable to deprive chairman Park of his right to control Kumho Tire.

In the meantime, it is forecast that the methods to deal with Kumho Tire will emerge as an agenda since lawmakers negative about the overseas sale of Kumho Tire will shower Choi Jong-goo, who is nominated as a candidate for the governor of the Financial Supervisory Commission, a flurry of questions at a hearing to be held on July 17, one day before Park’s answer, which will inevitably bring about another rear blast including a series of propaganda battle.