Graph from JoongAng Daily

JoongAng Daily has reported that the sale of Korea Express has been delayed due to differences in opinion amongst major shareholders and bidders on the inclusion of the company’s affiliate, Kumho Terminal, in the sale.

A Korea Development Bank (KDB) official stated that as a result, they “were not able to send advisory documents to bidders who have showed interest in the bid.”

Korea Express, the nation’s leading logistics firm, owns 100 percent of Kumho Terminal.

The KDB official added that the “two major shareholders of Korea Express, Asiana Airlines Inc. and Daewoo Engineering and Construction Co., disagree on whether or not Kumho Terminal should be sold separately from Korea Express or together in a block sale.” Both Asiana Airlines and Daewoo E&C each own a 23.95 percent stake in Korea Express.

Kumho Asiana Group, an affiliate of Asiana Airlines, requested that the creditors sell Kumho Terminal separately from Korea Express, so that it would be able to purchase back Kumho Terminal at a later date.

Kumho Asiana was the owner of Kumho Terminal until 2009, when it sold the company to Korea Express for 219 billion won ($200 million).

However, Daewoo E&C, asked creditors to sell Kumho Terminal with Korea Express, which would help increase the price of the latter.

In March, Posco, Lotte Group, and CJ Group submitted LOI to purchase Korea Express. Creditors were scheduled to receive final bids by May 13 and select a preferred bidder on May 16, but it was announced that the sale will be delayed until Asiana Airlines and Daewoo E&C reach an agreement.

Posco, Lotte and CJ have also demonstrated opposing opinions in this matter, as have strategic investors such as Hyosung and Kolon Industries.

According to industry officials, Posco and CJ want Kumho Terminal to be sold off separately because it will allow the final price of Korea Express to be lower.

Lotte, however, wants Kumho Terminal to be sold with Kumho Express because it would create more synergy with its existing retail business.

Kumho Terminal operates 16 regional bus terminals on large areas of land. Securing such land would help Lotte expand their enterprise by allowing them to build more retail outlets

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The report cited an unspecified source from the financial industry as saying that Korea Development Bank, the creditor of Kumho Asiana which is undergoing a restructuring process, is considering this method, instead of a sealed bid, in order to maximize the sale price of Korea Express.

The person told the paper that the method of an auction is considered to be more effective in raising the price tag in the upcoming sale since a number of companies have shown interest in buying Korea Express.

According to an earlier report, Kumho Asiana and its creditor Korea Development Bank are planning to sell a controlling stake in Korea Express held by Daewoo Engineering & Construction, Asiana Airlines and Korea Express itself. The report estimated that the sale of Korea Express could raise KRW 2trn (USD 1.7bn).

Source: Edaily (translated)

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According to a report in Money Today, an unidentified insider at KDB was cited as saying that the bank is expecting to receive agreements from the option holders by today (March 8th).

The report cited an unnamed insider at a financial institution which has a put-back option for a 5.61% stake portion in Daewoo E&C as saying his company would agree.

After KDB receives agreements from all option holders, the state-run bank will carry on the acquisition process for Daewoo E&C, and consequently the restructuring of Kumho Asiana Group will be shaped, the report said.

As previously reported, state-run KDB said it would acquire a Daewoo E&C stake from Kumho Asiana after Kumho entered into a debt restructuring program. The bank had been engaged in negotiations with the option holders in Daewoo E&C regarding their options to put back equity stakes, which they acquired when they helped finance Kumho Industrial s acquisition of Daewoo E&C in 2006.

See last week’s post -’KDB revises offer to holders of Daewoo E&C put-back options‘ for more information, and links to previous stories.

(Source: Money Today)

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Kumho Industrial is the listed South Korean construction unit of Kumho Asiana, the Korean conglomerate which is now under a debt workout plan.

The report cited an unspecified senior person at the creditors group as saying the group has no plans to return the management rights of Kumho Industrial to its former owner.

The report cited another unnamed source at the creditor group as saying a company sale would be the most predictable option for creditors after completion of the debt restructuring and rehabilitation process of Kumho Industrial.

It was earlier reported that creditors, including Korea Development Bank, had agreed on a debt restructuring of the Kumho Asiana group.

The original Money Today article can be found here.

See here for more stories on Kumho Asiana’s restructuring.

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Click to enlarge

(Source: Korea’s Financial Services Commission)

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“The group is devastated,”  Oh Nam-soo, Kumho Asiana’s president for strategic management.

After much speculation, and a hectic last few days, Bloomberg’s Bomi Lim and Kyunghee Park report, that Kumho Asiana Group has agreed to sell a controlling stake in Daewoo E&C for KRW 2.9 trillion ($2.5 billion) to its main creditor Korea Development Bank (KDB).

The article states -

State-owned KDB will buy 50 percent plus one share from the South Korean conglomerate through a private-equity fund for KRW 18,000 a share, Kim Young Kee, vice chairman of KDB, said in Seoul Wednesday.

Daewoo E&C’s sale was delayed after Jabez Partners and TR America, the two preferred bidders, failed to show enough commitment to push the deal through, said Oh Nam-soo, Kumho Asiana’s president for strategic management.

“The delay in the Daewoo E&C  sale caused liquidity to worsen. Together with our creditors, we will carry out an aggressive restructuring of the whole group.”

“The sale and debt restructuring will give Kumho Asiana Group some time to sort out its liquidity problem,” said Choi In Ho, a fund manager at UBS Hana Asset Management Co. in Seoul

But Kumho isn’t out of the woods yet -

“A debt restructuring may mean the group will need to sell more assets.”, Choi added

Kumho Industrial Co. and Kumho Tire Co. units will seek debt restructuring from creditors, the group said in a statement today.

Korea Kumho Petrochemical Co. and Asiana Airlines Inc. will also discuss ways of improving their finances with creditors. The group’s net debt was KRW 2.21 trillion as of Sept. 30, according to Bloomberg data.

The back story -

Daewoo E&C was previously part of Daewoo Group, which collapsed during the 1997-1998 financial crisis under $80 billion of debt, the biggest corporate bankruptcy in South Korea’s history.

In 2000 it was spun off and  run by creditors before Kumho Asiana bought 72 percent for KRW 6.43 trillion in November of 2006. (Financial Times – Kumho to pay $6.84bn for Daewoo E&C)

Kumho Asiana, was forced to sell Daewoo E&C after the stock fell 40 percent since the 2006 takeover. That left the company facing a potential KRW 4 trillion payment to creditors who received shares as part of the acquisition and have the right to sell their stock back to Kumho at more than twice the current market price.

KDB Group CEO - Min Euoo-sung

The KDB originally served as one of the two arrangers for the sale, together with Tokyo-based Nomura Securities Co., when it was reported  -

“Selling Daewoo E&C to markets will come ahead of a plan that KDB buys it through a private equity fund,” Min Euoo-sung, KDB Group CEO

(Reuters – S.Korea KDB wants Daewoo Eng sale in auction)

However, the day after KDB selected Jabez Partners, who had sovereign fund Abu Dhabi Investment Council as its main investor, and a  TR America consortium that included New York-based builder, Tishman Construction, as preferred bidders, the bank announced they were stepping down from their role as main sale arranger.

“Considering various conditions including a controversy over interest conflicts, we decided to drop our role as a main arranger for the sale of Daewoo E&C after close consultations with Daewoo’s owner Kumho Asiana Group,” the KDB said in a statement at the time.

Saying that the bank said was seriously considering providing Daewoo’s buyer with financial support once a genuine, capable bidder was selected.

Then in early December, when the submission date for LOCs rolled around, as was reported here, the Jabez and TR America consortiums both asked for more time.

The final kibosh however, came on December 18th, when the KDB chairman told reporters -

“Although we expect the sale of Daewoo Engineering to go smoothly, KDB, as a main creditor bank, is mulling a ‘plan B’ to prepare for the possible failure of the sale,”

(Sources: Bloomberg, Reuters, Financial Times, Maeil Business News, Korea Herald)

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A report in Korea’s Yonhap News Wednesday, stated that Korea Development Bank (KDB) will take over Kumho Life Insurance Co. in partnership with Korean PE firm – Consus Asset Management Co.

Consus Asset Management signed a to deal to buy a 52% stake in Kumho Life Insurance back in early November, but has been struggling to fund the transaction.

KDB will finalize a deal with Consus Asset Manager by Thursday to buy the life insurer with the two planning to set up a fund worth KRW 330 billion (US$283.6 million).

The decision came after creditor banks agreed with Kumho Asiana to reschedule debts by the group’s two affiliates, Kumho Tire Co. and Kumho Industrial Co., to help the group tide over its cash shortages.

For more information about Kumho Asiana’s restructuring please read the ‘Kumho Asiana forced into workout’ article from the Korea Herald.

(Source: Yonhap News)

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