Kumho Asiana`s two units to be put under debt workout

(ATTN: RECASTS lead; UPDATES with more details throughout)
SEOUL, Dec. 30 (Yonhap) -- Creditor banks of South Korea's cash-strapped Kumho
Asiana Group have decided to put two of the group's units under a debt
rescheduling program to help it ride out a liquidity squeeze, the main creditor
Korea Development Bank (KDB) and Kumho Asiana Group said Wednesday.
Earlier, Kumho Asiana asked its creditors to place Kumho Industrial Co. and Kumho
Tire Co. under the debt workout scheme to help it ease a worsening cash shortage
sparked by the delayed sale of the group's construction unit, Daewoo Engineering
& Construction Co.
KDB said a private equity fund led by the lender plans to buy a 50-percent stake
plus one share in the troubled builder for 18,000 won (US$15.5) per share in an
effort to accelerate the business normalization of the group.
The bank also will acquire Kumho Life Insurance Co. jointly with Consus Asset
Management Co., a local asset manager.
The group will sell its car rental unit, Kumho Rent-a-Car Co., to a consortium of
KT Corp. and MBK Partners Ltd., a local private equity fund, for 300 billion won.
"The move aims to preemptively stem a liquidity crisis that the failure in the
sale of Daewoo Engineering could bring to the group and to ease market jitters,"
KDB said in a statement.
Meanwhile, creditor banks plan to allow two other Kumho Group units -- Korea
Kumho Petrochemical Co. and Asiana Airlines Inc. -- more time for debt repayment
in return for the affiliates' pledges to restructure themselves.
Shares of Kumho Asiana Group lost ground, hit by its liquidity concerns. Shares
of Kumho Industrial tumbled by the daily limit of 15 percent to 8,330 won, and
Kumho Tire also plunged 15 percent to 3,605 won.
The process of selling the builder has been stalled since late November, when
Kumho Asiana picked two foreign funds -- Jabez Partners and TR America Consortium
-- as preferred bidders for Daewoo Engineering with the aim of selling the unit
within the year.
Kumho Asiana has been riddled with debt concerns after it bought a 72.1 percent
stake in Daewoo Engineering in 2006 for 6.24 trillion won. More than 3 trillion
won was funded by financial investors, including banks and private equity funds.
At that time, the group promised its 18 financial investors that it would buy
back their shares if share prices of Daewoo Engineering fell below 31,500 won.
Shares of Daewoo Engineering rose 0.39 percent to close at 12,800 won.
To help with the sale of the construction firm, the group recently requested that
financial investors hold off on exercising their rights to sell back the stakes
until Jan. 15.
But the process of selling Daewoo Engineering has not gone smoothly in the
market, as the two foreign funds failed to secure enough funds to buy the
builder.
Kumho Asiana's debt owed to local banks stands at around 18 trillion won, out of
which Kumho Industrial holds about 2 trillion won and Kumho Tire has an estimated
1.6 trillion won.
If creditor banks conduct debt-equity swaps for the two companies, the size of
the swap is likely to reach 2-3 trillion won, below the 4 trillion won that the
group will need to buy back the shares.
Meanwhile, Kumho Asiana Group said the family that owns the group plans to use
their private fortune to help improve the conglomerate's financial health and
shoulder responsibility.
sooyeon@yna.co.kr
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