Kumho’s Creditors Fund $1.08 Billion Capital Injection

The Korea Development Bank has led a band of Kumho creditors in signing a 1.2 trillion won ($1.08 billion) agreement; half in a debt-for-equity swap and half in new capital. Ahn Yang-soo, senior director of KDB and the executive in charge of Kumho’s debt, told the Korea Times: “Creditors agreed to assist Kumho. We will switch company debts into stocks. We also will give additional capital to help the company manage its businesses. We think the rescue plan will provide Kumho the momentum to turn its business around.’’

Tire Review reports the plan calls for creditors to exchange debts of 600 billion won ($540 million) for equities, while adding another 600 billion won in new capital. Creditors also agreed to reduce the capital of all shareholders, and let major shareholders take more responsibility for the company. To enact this plan, KDB needs written approval from 75 per cent of all creditors, which they are expected to achieve. With final approval, the creditors and Kumho Tire will sign a memorandum of understanding, the plan.

This is cash that is sorely needed as Kumho Tires’ 2009 financial information shows a net loss of 776,168 million won, some 287 per cent more in the red than the previous year and a loss 3,190 per cent greater than in 2007. Kumho Tire has not reported a net profit since 2006, when it earned 970 million won.