Kumho Tire may be headed to a court receivership as its labor union refuses to accept a deal from Qingdao Doublestar for a majority investment in the company.
Kumho is under a Friday deadline for creditor Korea Development Bank and its labor union to agree on the reorganization deal with Doublestar, a Chinese tiremaker. Under the deal, Doublestar has pledged to invest 646.3 billion won ($598.4 million) in the debt-ridden South Korean tire manufacturer for a 45% stake in the company.
If Korea Development Bank applies for court receivership, Kumho Tire is likely to be shut down, The Korea Herald reported. This means the creditors of Kumho Tire that include the bank, Woori Bank and Kookmin Bank may lose up to 1.3 trillion won ($1.2 billion). Kumho will also likely face liquidation if it is placed under court receivership, Yonhap News reported.
Since Doublestar’s investment was announced earlier in March, union members have opposed the deal, saying the company wants to acquire Korea’s advanced tire technologies, according to Joongang Daily. If the acquisition were to go through, the union has promised it would shut down the company, leading to the loss of many jobs. The union has demanded a takeover by a Korean company.
This week, South Korean tiremaker Tire Bank expressed interest in buying Kumho. However, no bid was placed, and creditors cast doubt on the company’s ability to settle Kumho’s debt and take over.