Creditors of Kumho Tire, South Korea’s second largest tiremaker, are planning to convene to discuss whether to extend the maturity date of 1.3 trillion won ($1.16 billion) worth of debt due late next month, said a creditor bank Wednesday.

“It is only reasonable for Kumho to pay back the loan due on June 30 by selling its tire unit, and request a five-year extension for the remaining debt,” the spokesperson of the state-run Korea Development Bank told The Korea Herald.

“Kumho Tire’s branch in China has not been able to make payments for almost seven years due to poor sales. Also, Kumho Asiana Group still has debt to pay back from buying back two of its units.”

China’s state-run tiremaker Doublestar, which is currently in negotiations to acquire Korea’s No. 2 tire company, had requested a five-year extension of the due date for the total 2.2 trillion won debt Kumho owes to the nine creditors, according to the KDB.

The total figure includes debt owed by Kumho Tire’s overseas corporations.

The KDB, which holds about 50 percent of the loan, had agreed on a five-year extension, while the second-biggest creditor Woori Bank is willing to postpone the maturity date by two years, KDB said.

Woori Bank holds a 34 percent voting right among creditors. At least 75 percent of creditors need to approve the issue for it to pass.

KDB, which is leading the deal, plans to call for a meeting to ask for other creditors’ opinions later this month or early next month.

“We have not received any notice or updates from KDB. We have not made any decision regarding the extension,” said the spokesperson of Woori Bank.

If creditors do not ratify a postponement, Double Star may refuse to purchase Kumho Tire, ultimately leaving Kumho Asiana Group Chairman Park Sam-koo to pay back the loan.

Creditors are said to be skeptical of whether Park has the financial backing.

If an extension is approved, Double Star is expected to proceed with the deal, while Kumho Tire is likely to wait to regain its right of first refusal. 

By Kim Bo-gyung(lisakim425@heraldcorp.com)