Shareholders of Kumho Tire are understood to have entered in-depth discussions last week to decide on the details of a 110 billion won new share sale set for May.
Kumho Tire, the auto parts unit of stricken Kumho Asiana, said January 3 it had not made a final decision on a capital raise despite on-going talks with a group of creditors, who are its largest shareholder. Woori Bank, Korea Development Bank, Kookmin Bank and Korea EXIM, own a combined 47.63 percent stake in Kumho Tire, which is restructuring debt.
Kumho’s shares have risen 34 percent since the disclosure and were trading at 13,600 won Monday morning. That values the creditor’s known stake at 697 billion won, based on the current market capitalization of 1.472 trillion won. Creditors’ undisclosed holdings could bring their total stake to as much as 60 percent.
Kumho Tire was reportedly planning to raise 110 billion won from a third party allotment to Chairman Park Sam-Gu, who is trying to regain control of the company. That has been previously agreed to by the creditor group, a company insider said. But different discounts and complicated tax issues are said to have creditors reviewing their options on how best to execute the move. Regardless of the method, Park will be allowed to acquire a stake.
A rights offering and public offering are also being considered to optimize the fairest price and preserve the interests of existing shareholders.
In a rights offering, creditors could sell the rights or choose to not subscribe to the offering so that Park could take up the shortfall. A rights offering has no discount limit but usually does not exceed 30 percent, two equity capital market bankers said. A public offering allows for an up to 30 percent discount while a third party placement allows for an up to 10 percent discount.
Technically speaking, a company under restructuring could be freed of any discount cap, if required, but they usually do not flout normal market custom in consideration of minority shareholders, one of the bankers said.
The proceeds could also be used to repay some of the 300 billion won worth of foreign currency loans maturing throughout this year.
Kumho Tire has an operating income of 194 billion won and net profit of 86 billion won as of September 30, 2011.
by mergermarket reporter Kate Kim