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Cash-strapped tiremaker Kumho Tire Co. was at a crossroads Friday as the deadline approached for the labor union's agreement to the planned sale of a majority stake to a Chinese investor.
The main creditor Korea Development Bank has warned Kumho Tire that it will face court receivership unless the labor union decides to accept the stake sale to China's Qingdao Doublestar Co. by the end of the day.
According to industry sources, creditors' voluntary agreement on financial support for Kumho Tire ends Friday, meaning they will no longer provide funds to the troubled company.
Faced with a severe cash crunch, Kumho tire has no cash to pay back commercial paper and other debts that will start to mature Monday, they said.
Against such a backdrop, its creditors have demanded the trade union agree to the stake sale to Qingdao Doublestar, which they see as the only way to keep the tiremaker afloat. The state lender has warned that it will file for receivership next month should the labor union refuse to accept it.
KDB is planning to sell a 45 percent stake in Kumho Tire for 646.3 billion won ($608 million) to the Chinese tiremaker.
The labor union has fiercely opposed the sale plan, voicing concerns that Qingdao Doublestar may eventually exit South Korea after acquiring the company's technology. It has called on KDB to find domestic buyers.
Tirebank, a local retailer of tires, said earlier this week that it will bid for the stake in Kumho Tire.
Doublestar was picked as a preferred bidder to buy a controlling stake in Kumho Tire last year, but the deal was terminated after the Chinese firm demanded a lower price. Earlier this month, KDB said Doublestar accepted the new deal to buy Kumho Tire.
Industry watchers said should Kumho Tire be placed under receivership, it would end up being liquidated as the firm's liquidation value is estimated to be twice its going concern value. (Yonhap)
