Creditors issue ultimatum over Kumho Tire brand dispute
SEOUL-- South Korea's state-controlled banks issued an ultimatum Tuesday urging Kumho Asiana Group to make a concession to resolve a dispute over the usage fee of the Kumho Tire brand with China's Qingdao Doublestar Co.
At a meeting of shareholders, creditors threatened to "reconsider" financial ties with the group if a deal to sell Kumho Tire to the Chinese company falls through.
Creditors, including the Korea Development Bank, also plan to force Kumho Asiana Chairman Park Sam-koo to revoke the right of first refusal for Kumho Tire.
Top executives of Kumho Tire will be asked to step down due to their management failure, creditors said.
The latest move is needed for creditors to complete the deal with Qingdao Doublestar, creditors said.
"To normalize Kumho Tire, this sale must be made," creditors said in a statement. "Through further consultations with Kumho Asiana Group, we will resolve the trademark issue at an earlier date."
Kumho Asiana said it has not received an official stance on the outcome of Tuesday's meeting from creditors, adding that it will review the demands made.
State-run Korea Development Bank (KDB) is a main creditor of Kumho Tire and Asiana Airlines, the nation's second-largest carrier under Kumho Asiana.
Creditors of Kumho Tire include Woori Bank, Kookmin Bank, Hana Bank and the Export-Import Bank of Korea.
Qingdao Doublestar signed a 955 billion won (US$839 million) deal in March to acquire a 42-percent stake in Kumho Tire, but the acquisition hit a snag over how much the Chinese company should pay for the use of the Kumho brand name.
The parent of Kumho Tire, Kumho Asiana Group, called for the Chinese company to pay 0.5 percent of its sales to use the name, while Qingdao Doublestar reportedly suggested that it would pay 0.2 percent.
Earlier in the day, creditors said they were considering asking Qingdao Doublestar to accept the proposal by Kumho Asiana Group. In return, creditors could give a financial incentive to the Chinese company for the brand usage fee.
Given that Kumho Tire has annual sales of about 3 trillion won, the difference of 0.3 percentage point is estimated at some 9 billion won, according to creditor bank officials.
Creditors, which hold 2.2 trillion won in Kumho Tire bonds, could offer the Chinese company an extension on the maturity of bonds.
The idea was discussed by creditors and shareholders earlier in the day.
Kumho Asiana placed Kumho Tire and Kumho Industrial under a debt rescheduling program in December 2009. Creditors, including KDB and Woori, 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 its 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 2016 from 67.5 billion won a year earlier, according to a regulatory filing.
Source: Yonhap News Agency