Acceptance of Daewoo Sale to Aid Kumho Restructuring Plan
The Kumho Asiana Group is one step closer to untying its financial knots following the financial investors of Daewoo Engineering and Construction accepted the terms for selling their share in the company. This leaves the path clear for Kumho Asiana to continue its restructuring plans a step further without losing Kumho Industrial to court receivership.
Kumho acquired a 72.1 per cent stake in Daewoo Engineering for 6.4 trillion won in 2006, with more than half the funds coming from a group of financial investors, including banks and private equity funds. At the time of acquisition, Kumho Asiana promised the investors that it would buy back a 39 percent stake in Daewoo Engineering if the builder’s stock prices fell below 31,500 won by December 15, 2009. As The Korea Times comments, this proved to be an ill-advised gamble as Daewoo Engineering’s shares plummeted below 15,000 won in the aftermath of the global economic downturn.
In December, the Korea Development Bank (KDB) proposed that a private equity fund, led by the state lender, would buy 50 per cent plus one share in Daewoo Engineering for 18,000 won per share. With the 18 financial investors now agreeing to back the plan and sell their Daewoo Engineering stakes to a KDB-led private equity fund at that price, the chance exists for Kumho Asiana to claw its way back.
The KDB and other creditors are expecting to finalise a workout programme for Kumho Industrial by the end of the month, although the bank admits that the process could possibly take longer. A workout for Kumho Tires could prove more difficult, The Korea Times comments, with the company’s unionists voting to approve a strike to resist the restructuring plan put forward by the KDB.