Kumho Tire working out finances with its South Korean creditors

ERJ staff report (TB)

SEOUL, South Korea (Dec. 30, 2009) - Kumho Tire Co. Inc. has entered into a “work-out” procedure with creditors to address short-term financial difficulties.

The “work-out” is a procedure practiced in South Korea that does not involve the court system, Kumho said, whereby the company and creditors work together to address their issues. The “work-out” procedure is permitted for companies that are presumed to have a high possibility of business normalization but have suffered temporary difficulties in repaying loans to financial institutions.

The financial difficulties relate to the acquisition in 2006 by Kumho's parent, Kumho Asiana, of Daewoo Engineering & Construction Co., which involved Kumho Tire as an investor.

Kumho Asiana has been trying to sell Daewoo, but has not been able to find a buyer in the current down economy. As a result, Kumho Asiana has suffered capital losses.

Kumho Tires' overseas entities are not subject to the “work-out,” meaning Rancho Cucamonga, Calif.-based Kumho Tire USA will continue as usual during the “work-out” period.

Kumho did not comment directly on published reports that the situation was forcing it to delay paying December salaries for employees in Korea until the new year. The reports, citing financial analysts, said Kumho Tire has a loan payment of nearly $200 million due by year-end 2009.

From Tire Business (A Crain publication)