SEOUL, July 7 (Korea Bizwire) – Creditors of Kumho Tire Co. on Friday decided to offer final concessions to resolve a dispute surrounding the usage fee of the Kumho brand between the tiremaker’s parent company and China’s Qingdao Doublestar Co.
The concessions came after a meeting earlier in the day with Kumho Tire’s creditors, which are led by state-run Korea Development Bank.
Under the concessions, Qingdao Doublestar is required to pay 0.5 percent of its sales as a brand usage fee to Kumho Asiana Group for 12 years and six months, according to officials who attended the meeting.
Kumho Asiana must inform creditors of whether it will accept the concessions or not by next Friday.
Qingdao Doublestar signed a 955 billion won (US$827 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.
Creditors also gave a “D” grade to the management of Kumho Tire for a second consecutive year, paving the way for them to ask the tiremaker to sack its chairman Park Sam-koo.
Kumho Asiana has called for the Chinese company to pay 0.5 percent of its sales to use the name for 20 years, while Qingdao Doublestar reportedly suggested that it would pay 0.2 percent for five years.
In offering the final concessions, creditors agreed to 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 was estimated at some 9 billion won, according to creditor bank officials.
Local creditors, which hold 2.2 trillion won in Kumho Tire bonds, could offer the Chinese company an extension on the maturity of bonds.