By Kim Jung-hwan and Chung Seok-woo
South Korea’s second industry leader Kumho Tire Co. which now needs to save itself after its sale to Chinese rival Doublestar Tyre fell through was turned away by creditors to come up with more feasible plan to stay afloat.
The tire maker on Tuesday handed in a self-rescue plan to its main creditor bank and stakeholder Korea Development Bank (KDB), vowing to raise 630 billion won ($559 million) to pay back lenders and invest capital into facilities.
It had to return to the bank Wednesday to add details because the KDB complained of the plan lacking depth and workability.
Under its outline, Kumho Tire hopes to sell its factory in China for around 300 billion won, issue new shares worth 300 billion won, and sell its 4.4 percent stake in Daewoo Engineering & Construction for 130 billion won. It will reduce 130 office workers, and Park Sam-koo, chairman of Kumho Asiana Group and also the tire maker, will surrender his right to buy back the tire company currently under creditors’ ownership if the recapitalization plans do not go through.
The plan received harsh criticism from the creditor group as it does not explain to whom the rights offering would be made and how to materialize other asset sales.
The creditors upon receiving a formal letter from Doublestar on Tuesday to formally end the 955 billion won deal that had been delayed since March over multiple issues had planned to hold an extended stakeholders’ meeting next week to review the self-rescue plan of Kumho Tire as an alternative option to reattempting competitive sale.
But the creditors’ meeting may be delayed if Kumho Tire cannot fast supplement its self-rescue scheme.
Creditors have warned that they will send the tire maker to the bankruptcy court if Park and the management cannot come up with financial means to save the company that is slipping further into liquidity crisis.