Kumho Asiana May Face Court Receivership
After owners of troubled Kumho Asiana Group rejected a demand by creditors that they offer their stockholdings and assets as collateral for fresh loans, creditors have said all restructuring steps would be put on hold, with some floating the idea that key parts of the group would be put under court receivership, reported the Korea Times.
Min Euoo-sung, CEO of the state-run Korea Development Bank (KDB) ― Kumho’s main creditor ― responded by putting on hold the provision of fresh loans to the group, and threatened to withdraw a guarantee that the Kumho founding family would retain control of its management. Min has been demanding that the Kumho owners submit all they have ― except for their houses ― as collateral. Under a debt-rescheduling program mutually agreed upon late last year, Kumho’s major shareholders would keep managerial rights for up to five years,if they complied with the KDB demand. Group owners hold stakes in Kumho Petrochemical and other units, worth about 250 billion won.
The restructuring process has not moved forward much over the past month as group family members dragged their feet on asset transfers. Additionally, creditors and financial investors have been at odds over how to handle the latter’s investment in Daewoo E&C.
“Unless they fulfil their promise, we cannot inject fresh funds into Kumho Industrial and Kumho Tire, which were put into a creditor-led debt repayment program in early January. Additionally, parts suppliers and other companies doing business with them will also face financial hardship. In the worst-case scenario, the two units may be forced to file for court receivership,’’ a top creditor said, according to the newspaper.
Creditors put Kumho Industrial and Kumho Tire under the debt repayment program on Jan. 7. Kumho Petrochemical and Asiana Airlines voluntarily signed pacts to undergo self-restructuring plans soon after.
In 2006, Kumho Industrial and Kumho Tire signed a “put option” deal with 18 financial investors on behalf of the group when it took over Daewoo E&C. The group promised to buy back shares in the builder on 15 December, 2009, if the investors wanted to sell them at a pre-set price of 31,500 won per share in return for a 3-trillion-won investment, expecting that the stock price would hover well above that mark.
The group spent 6.5 trillion won to take over a 72.1 per cent stake in Daewoo. However, the deal went sour as the shares plummeted to below 13,000 won in the aftermath of the global credit crunch late last year, forcing the group to pay the investors an additional 4.2 trillion out of its own pocket. With the group failing to dispose of the construction company, it had no choice but to turn to KDB for help.
Since the two firms entered a creditor-led debt rescheduling program, the put option deal has been turned into bonds. Creditor banks have decided to buy back stakes held by 18 financial investors at 18,000 won per share, not 31,500 won, and make up for the difference by giving them bonds that will be converted into equity, the Times reported. (Tire Review)