Creditors of Kumho Tire Co. said Friday they will push forward a debt restructuring plan for the financially troubled tiremaker as they found its self-rescue plans insufficient to pull off a turnaround, the main creditor Korea Development Bank said Friday.
With the decision, the country's second-largest tiremaker has been placed under a creditor-led restructuring program three years after it graduated from a legally binding workout program in 2014.
That program was also led by its lenders.
|KDB Chairman Lee Dong-gull attends a press conference last week. (Yonhap)|
"We, nine creditors, will conduct due diligence on Kumho Tire in the next one and a half months after extending debt worth 1.3 trillion won ($1.1 billion) maturing this month to the end of this year," KDB Chairman and CEO Lee Dong-gull said in a press conference.
Kumho Asiana Group Chairman Park Sam-koo has now given up management control of the tire company and any say in the use of the tiremaker's brand name as well as the right of first refusal, the banker said. He said creditors will be able to focus on putting the tiremaker back on track through a possible cash injection and other measures.
Under the right of first refusal, Chairman Park has the priority right to buy back the company when it is up for sale.
But he said a rights issue or capital reduction have not been considered as a restructuring measure.
In the process of restructuring, all the concerned parties -- creditors, workers at the tiremaker and subcontractors -- badly need to "share the burden deriving from the painful debt-rescheduling program," the KDB chief said.
Asked if the restructuring efforts include job and wage cuts, he said the lender will consider "all possible options" to normalize the operations of the tiremaker.
On Thursday, creditors appointed Senior Executive Vice President Sohn Bong-young as a "temporary representative" of the tiremaker. The appointment came right after Kumho Tire's Chairman and co-CEO Park Sam-koo and President and co-CEO Lee Han-seob stepped down.
Creditors plan to appoint a new CEO with expertise in the tire industry to lead the company as soon as possible, Lee said.
In March, Qingdao Doublestar, a Chinese tiremaker, 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 when creditors rejected Doublestar's demand to cut the purchase price by 16 percent to 800 billion won, citing deteriorating earnings.
The deal's collapse is also due to Chairman Park's refusal to accept the Chinese company's request on the use of the tiremaker's brand name.
In the January-June period, Kumho Tire's net losses deepened to
108 billion won from 22 billion won a year earlier. At the end of June, it owed 2.74 trillion won to financial institutions.
Kumho Tire, which earns about 22 percent of its sales from North American operations, opened its first US plant with an annual capacity of 4 million units in Georgia last year. Its global capacity stands at 65 million tires per year.