Creditors to begin talks Tuesday to finalize Kumho Tire deal

Last month, Qingdao Doublestar signed a 955 billion won (US$830 million) deal to acquire a 42-percent stake in Kumho Tire in a deal that will help it turn into China's biggest tiremaker.  

But creditor banks and Qingdao Doublestar couldn't start talks to finalize the transaction until Kumho Tire Chairman Park Sam-koo gave up the right of first refusal. 

"Starting Tuesday in Seoul, we (creditors) will discuss with officials from Doublestar mainly over three things: the use of brand name; extension of debt maturing date; government approval for the deal," a KDB spokesman said. 

As for the use of brand name Kumho Tire, the Chinese company has asked to continue using the name for the next 20 years. Kumho Tire is the country's second-largest tiremaker by sales after Hankook Tire Manufacturing Co.

Kumho Industrial Co. which has the rights for the brand name has recently allowed Kumho Tire to use the name by April 30 next year but added a condition that the contract period could be shortened or revised. The two companies are key affiliates of Kumho Asiana Group, an airline-to-petrochemical conglomerate headed by Park.

Secondly, Kumho Tire faces 1.3 trillion won worth of debt maturing in June out of its total debt valued at 2.2 trillion won.

As the creditors signed the deal to sell the debt-ridden tiremaker to Doublestar, they are widely expected to extend the maturity date.

When it comes to obtaining government approval, industry watchers do not expect the Seoul government to reject the deal because Kumho Tire is a supplier of tires for fighter jets and military trucks.

As the amount of tires for military aircraft and trucks looks pale before that of tires for passenger vehicles, they say the deal will go smoothly without any major problems.

Kumho Asiana placed Kumho Tire and Kumho Industrial under a debt rescheduling program in December 2009. Creditors, including state-owned KDB and Woori Bank, agreed to convert debt to equity in 2010 to hold a combined 42-percent stake in the tiremaker. 

Kumho Tire, which earns about 22 percent of its sales from North American operations, opened its first U.S. plant with an annual capacity of 4 million units in Georgia in May 2016. Its global capacity reaches 65 million tires a year.

Kumho Tire's net losses narrowed to 37.9 billion won for the whole of 2016 from 67.5 billion won a year earlier, according to a regulatory filing. (Yonhap)