Bank Chief Calls for Shareholders to Help Fix Kumho

The Korea Times reports that Korea Development Bank (KDB) Chairman Min Euoo-sung has called for dedicated efforts by the Kumho Asiana Group owner’s family to save the group.

The head of the state-run bank, one of the main creditors of the troubled group, said in an interview with Yonhap News that the owners or major shareholders of Kumho, who are responsible for the troubles facing the group, should make greater efforts for restructuring.

“The group owner’s family agreed to provide all their shares, including their stake in Kumho Petrochemical, as collateral,” Min said.

He added that they should provide all assets except for the house they live in to help Kumho survive.

The country’s once-ninth-biggest conglomerate has been in a serious cash flow problem to after a series of mega-scale acquisitions over the past few years, especially due to the put option deal it signed with financial investors when taking over Daewoo Engineering & Construction in 2006.

Kumho Industrial and Kumho Tire signed a put back option with 18 financial investors, promising to buy back the shares of Daewoo at 31,500 won per share on Dec. 15, 2009, if investors wanted to sell their stake.

However, as Daewoo shares plunged to below 13,000 won after the global financial crisis, the big deal turned into a disaster.

The group is preparing measures to solve the liquidity problems with main creditors, including debt repayment programs and voluntary restructuring.

Min said the group would be given priority to buy back shares of Kumho Industrial and Kumho Tire after three years when the two subsidiaries normalize.

For Daewoo E&C, he said the acquisition of Daewoo should be completed in the near future by attracting strategic investors. “It is a very good company, but it has been under an unfortunate destiny. We will pull up its value by attracting businesses such as Dongkuk Steel Mill as strategic investors. It will be made into a growth engine for the country,” he was quoted as saying.

He said the workout plan for Kumho would be ready in two months. It is likely to include capital reduction, converting debt into equity and a reduction of interest payments.

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