Conglomerate holds session to quash rumors on possible liquidity problems
Kumho-Asiana Group has gone all out lately to dispel rumors that it may shortly face a liquidity problem so severe that it would not be able to meet all of its financial obligations.
The group went public with its financial conditions, holding a special briefing session to show how it will be able to expand cash holdings by selling its properties and shares by its affiliates.
The session was attended by Oh Nam-soo, president of the group's strategic management headquarters, along with CEOs of the group's major affiliates including Asiana Airlines, Daewoo Construction, Kumho Petrochemical, Korea Express and Kumho Tire. They explained their companies'second quarter performance results and plans to build up their cash holdings by selling idle assets if needed to the tune of some 4.57 trillion won.
They also allocated much of their time to explaining how they plan to solve the put-back option in connection with the takeover of Daewoo Construction, which is at the center of the rumors that the group has a serious liquidity problem.
A day later, Chairman Park Sam-koo announced at a gathering of officers and staff of the group, that the group's net profit for this year would total around 1 trillion won, in a further effort to defray the wild rumors of the group's financial well-being.
President Oh said the group is considering a plan to request shareholders of Daewoo Construction to extend the maturities of their put-back options until the end of next year and the end of 2010 to help ease the group's financial obligations. The shareholders of Daewoo Construction can exercise their option in the middle of December next year at a per-share price of 34,000 won as agreed by the group at the time of the takeover of the construction company. The shares have lately traded at around 13,000 won per share.
President Oh said Daewoo will be able to raise the value of its shares by selling its non-core assets for 2 trillion won, along with various support measures to boost its stock price in a bid to ease its financial burdens.
Another issue that has been drawing concern with a steep fall in the prices of Daewoo Construction shares is that Kumho Industry, a major affiliate of the group, would incur a heavy loss, according to Oh.
He said the company might have to reduce its capital or pay a high mid-term dividend if the share prices don't rise. The question of how much dividend should be paid would be resolved at the end of the year, the CEO continued.
Another pressing problem for the group has been paying off Cooper Tire, the second largest shareholder in Kumho Tire, as the U.S. tire maker wants sell its shares (10.7 percent stake or 7.9 million shares) in Kumho Tire under the put-back option. Oh said the matter will be settled in a short time as a deal with another investor who will take over the shares from Cooper Tire is nearing a conclusion.
The group made a deal with Cooper Tire to take over a stake in Kumho Tire when it launched the tire company. It needed a friendly shareholder, as it can hold only a limited share in the new company due to regulatory restrictions. At the time of Cooper Tire's takeover of Kumho Tire shares, the per-share price was 14,650 won per share and the U.S. tire company would sell back its shares to Kumho Group at the share price agreed when the deal was made.
In the meantime, the group's sales revenue for the second quarter came to 6.04 trillion won, up 21 percent YoY and up 20.6 percent from the previous quarter, the largest quarterly performance in its history. Operating profit in the quarter came to 385.6 billion won, up 42.9 percent from the preceding quarter with net profit up 356.5 percent at 226.9 billion won.
The group's debt ratio stood at 156.4 percent at the end of the second quarter, the liquidity ratio was 140.3 percent and the long-term loan ratio was 71.2 percent, showing no signs of financial problems for the group, officials said. nw
Chairman Park Sam-koo of Kumho-Asiana Group