Creditors would not assure Kumho's management rights: KDB chief

(ATTN: RECASTS headline, lead; REWRITES paras 2-9 to reflect updated info)
SEOUL, Feb. 7 (Yonhap) -- Creditors of the financially troubled Kumho Asiana
Group warned Sunday the group's owner family may lose their managerial rights if
they fail to offer their stock holdings as part of the group's survival efforts.
Min Euoo-sung, chief of the main creditor Korea Development Bank (KDB), said
"extraordinary" measures may be taken if the group's owner family let a Sunday
deadline pass without any action. He said special measures under consideration
include deprivation of the family's managerial rights to the group.
The creditors on Dec. 30 put Kumho Asiana's two key units -- Kumho Industrial Co.
and Kumho Tire Co. -- under a debt rescheduling program to help the group as a
whole avert a liquidity crisis after a series of reckless takeover moves.
But the restructuring of the group has been sluggish as the its owner family have
dragged their feet in providing their stakes as collateral. The family had
promised to do so in exchange for maintaining their managerial rights over the
group.
"Creditors notified the group's family of transferring the right to dispose of
stakes in affiliates to creditor banks by Feb. 7, but they did not keep the
promise," Min told reporters.
"We plan to withdraw all promises -- debt rescheduling, the supply of fresh funds
and the guarantee of managerial rights -- as the family did not abide by the
deadline."
The creditors plan to hold a meeting on Monday to come up with measures to deal
with the family's reluctance to take responsibility as the largest shareholder.
The creditors agreed last week to provide fresh funds worth a combined 380
billion won (US$324.5 million) to Kumho Industrial and Kumho Tire only when the
owner family shows genuine commitment to take responsibility. Market watchers
said if creditors will not offer funds to the two firms, their cash crunches are
likely to deepen and creditors may consider putting Kumho Petrochemical under the
debt workout program.
Last year, creditors agreed not to put the group's two other units -- Korea Kumho
Petrochemical Co. and Asiana Airlines Inc. -- under the debt workout program.
Instead, they will have to improve their finances through massive restructuring
efforts.
Kumho Asiana has been reeling under mounting debt after buying a 72.1 percent
stake in Daewoo Engineering in 2006 for 6.4 trillion won, a deal mostly funded by
financial investors.
Kumho faced a cash call worth around 4 trillion won from financial investors, who
exercised their rights to sell shares in Daewoo Engineering back to the group at
above-market prices. Kumho Industrial, the biggest shareholder of Daewoo
Engineering, must repay the amount by June 15.
A private equity fund led by KDB is seeking to buy a 50 percent stake plus one
share in the construction firm for 18,000 won per share.
"A big picture of Kumho's turnaround plan will be drawn up by the end of this
month and creditors will seek to complete details by March," Min added.
Also Sunday, Min said U.S. President Barack Obama's recent proposal for tighter
bank regulations, called the "Volcker rule" affected the KDB's decision to pull
out of bidding for a stake in Siam City Bank Plc, Thailand's No. 7 lender.
"If the Volcker rule is approved in Congress, it will significantly affect the
corporate investment bank model, which KDB is targeting," Min said. "KDB plans to
watch how the Volcker rule will develop and its potential impact on the global
markets in crafting out the bank's overseas expansion and privatization plans."
The government plans to reduce its 100 percent stake in KDB Financial Group
within four years to put it in private hands. The group was created in late
October as the holding company for KDB and four other units.
KDB plans to list shares of the holding company on the Seoul bourse in 2011 and
on the New York stock market in 2012 in a bid to accelerate the privatization of
the bank.
sooyeon@yna.co.kr
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