Restructuring at Kumho Tire Likely
The Kumho Asiana group has reportedly agreed to restructure Kumho Tire along with its Kumho Industrial subsidiary following the failed sale of Daewoo Engineering & Construction to two private equity firms. Had Jabez Partners and TR America purchased the company for US$2.4billion, Kumho would have found it easier to meet a $3.4 billion payment in January, but raising funds for a purchase at between KRW 20,000 and 24,000 (£10.40 and £12.50) per share proved more difficult than anticipated.
Restructuring of Kumho Tire and Kumho Industrial will most likely include the Park family committing their own shareholdings as collateral against new loans. Lenders will convert their loans to Kumho Industrial and Kumho Tire into equity and the two companies will be placed under their joint management. Kumho’s largest creditor, Korea Development Bank, will through its private equity fund take a majority stake in Daewoo E&C, and is also expected to acquire Kumho Life Insurance in partnership with Consus Asset Management.
This has not been Kumho Tire’s sole financial difficulty. Due to a short-term lack of liquidity brought about by the maturity date of commercial papers coinciding with the date for paying the costs of plant operation, Kumho Tires postponed the payment of its employees’ December wages from the 27th of the month until January.