2 Kumho Asiana Units to Undergo Debt Workout

The Kumho Asiana Group and its creditor banks said Wednesday that they will put the cash-strapped conglomerate’s tire and industrial units under a debt restructuring program.

The move is geared to help ease the group’s worsening cash crunch sparked by the delayed sale of Daewoo Engineering & Construction. In return, Korea Development Bank, Kumho’s main creditor, will take over the builder.

Kumho and the bank made the announcement at a joint news conference in Seoul.

Kumho Chairman Park Sam-koo and his relatives will maintain control over the conglomerate, but must put all of their shares of Kumho affiliates as collateral for new loans.

Once Korea’s ninth-biggest conglomerate, Kumho will suffer a significant setback in giving up control over three major affiliates: Daewoo Engineering & Construction, Kumho Tire and Kumho Industrial.

Under the debt workout, lenders will convert their loans to Kumho Industrial and Kumho Tire into equity and put the two companies under their joint management.

In addition, the Korea Development Bank will set up a private equity fund to acquire 50 percent plus one share in Daewoo Engineering & Construction for 18,000 won (15.48 U.S. dollars) a share. The bank will also create another fund to take over Kumho Life Insurance jointly with domestic fund manager Consus Asset Management.

The conglomerate will maintain control over its remaining affiliates, including Kumho Petrochemical and Asiana Airlines.

jaeyuna@donga.com