Creditors consider arbitration over brand dispute between Kumho, China's Doublestar

SEOUL, June 20 (Yonhap) -- Creditors of Kumho Tire Co. are considering a move to seek arbitration over a dispute surrounding the usage fee of the Kumho brand between the parent company of the South Korean tiremaker and China's Qingdao Doublestar Co., financial sources said Tuesday.

Qingdao Doublestar signed a 955 billion won (US$839 million) deal in March to acquire a 42-percent stake in Kumho Tire, but the process of acquisition hit a snag over how much the Chinese company should pay for the use of the Kumho brand name.

The parent of Kumho Tire, Kumho Asiana Group, called for the Chinese company to pay 0.5 percent of its sales to use the name, while Qingdao Doublestar reportedly suggested that it would pay 0.2 percent.

Creditors were considering asking Qingdao Doublestar to accept the proposal by Kumho Asiana Group. In return, creditors could give a financial incentive to the Chinese company for the brand usage fee.

Given that Kumho Tire has annual sales of about 3 trillion won, the difference of 0.3 percentage point is estimated at some 9 billion won, according to creditor bank officials.

Creditors, which hold 2.2 trillion won in Kumho Tire bonds, could offer the Chinese company an extension on the maturity of bonds.

The idea will be discussed at a meeting of creditors and shareholders later in the day.

Also, creditors are likely to ask Qingdao Doublestar to make an additional investment in Kumho Tire.

"The most important thing is to sell Kumho Tire. Depending on the situation, creditors could make up the difference over the rate of brand usage fee," said an official at one of creditor banks.

"Even if Doublestar buys Kumho Tire, an additional investment is needed to prop up the company," the official said.

Kumho Asiana placed Kumho Tire and Kumho Industrial under a debt rescheduling program in December 2009. Creditors, including state-owned KDB and Woori Bank, agreed to convert debt to equity in 2010 to hold a combined 42-percent stake in the tiremaker.

Kumho Tire, which earns about 22 percent of its sales from North American operations, opened its first U.S. plant with an annual capacity of 4 million units in Georgia in May 2016. Its global capacity reaches 65 million tires a year.

Kumho Tire's net losses narrowed to 37.9 billion won for 2016 from 67.5 billion won a year earlier, according to a regulatory filing.
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