Kumho Asiana likely to tap owner's private fortune

SEOUL, Dec. 30 (Yonhap) -- South Korea's cash-strapped Kumho Asiana Group is in
talks with its creditors over whether the group's owner should use his private
fortune to help improve the conglomerate's financial health, sources said.
Kumho Asiana is pushing to put the group's two units -- Kumho Industrial Co. and
Kumho Tire Co. -- under the debt rescheduling program to help it ride out a
worsening cash shortage sparked by the delayed sale of the group's construction
unit Daewoo Engineering & Construction Co.
"Creditors and Kumho Asiana Group have substantially narrowed their differences,"
said a senior official at a creditor bank, requesting anonymity. "If creditors
decide to put a large company under the debt workout program and to provide funds
through a debt-equity swap, the biggest shareholder or owner of such a
conglomerate needs to shoulder some responsibility."
Market watchers said it is likely that the family that owns the group will pool
their money together in a bid to help improve the group's financial health.
In late November, Kumho Asiana picked two foreign funds -- Jabez Partners and TR
America Consortium -- as preferred bidders for a controlling stake in its
construction unit, with the aim of selling the unit within the year.
When Kumho Asiana bought the builder in 2006, 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 (US$27).
But 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. One investor has exercised a put-back option for the
builder.
Kumho's debt owed to local banks stood 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 decide to conduct debt-equity swaps for the two companies, the
size of such a swap is likely to reach 2 to 3 trillion won, below the 4 trillion
won that the group will need to buy back the shares.
The group bought a 72.1 percent stake in the builder for 6.42 trillion won, 3.5
trillion won of which was funded by financial investors, including banks and
private equity funds.
The chief of Korea Development Bank (KDB) said last week that the bank is
considering drawing up a "Plan B" in case the sale of Daewoo Engineering hits a
snag. KDB, the main creditor of the builder, may form a private equity fund to
buy the builder, while creditor banks are considering a joint purchase.
sooyeon@yna.co.kr
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