Block Deal Sale of Kumho Tire: More Shares Likely to Be Sold by Creditors

• Woori Bank completed a block deal sale of 11 million shares of Kumho Tire Co (073240 KS) (3.83% of outstanding shares) on 18 July.

• After the recent sales by Woori Bank and the Export-Import Bank of Korea, the creditors' stakes in Kumho Tire has been reduced to 19.17%.

• Despite Kumho Tire's recent improvement in financial performance, we are more concerned about the additional stake sale by the financial institutions that still own 19.2% stake in the company.

Photo by Frank Albrecht on Unsplash

Woori Bank completed a block deal sale of 11 million shares of Kumho Tire Co (073240 KS) (3.83% of outstanding shares) on 18 July. As a result, Woori Bank's stake in Kumho Tire decreased from 22.36 million shares to 11.36 million shares. In addition, the Export-Import Bank of Korea sold 291,726 shares of Kumho Tire from 8 to 17 July (average selling price of 6,190 won). Kumho Tire's improving performance and financial structure normalization are providing better opportunities for resolution of bad loans in the banking sector.

Nine financial institutions, including Woori Bank and the Korea Development Bank, previously held a 23.1% stake in Kumho Tire. After the recent sales by Woori Bank and the Export-Import Bank of Korea, the creditors' stakes in Kumho Tire (second largest tire manufacturer in Korea) has been reduced to 19.17%.

The following are the main owners of Kumho Tire:

The recent sale of Kumho Tire is the result of lifting of stock disposal restrictions. On 7 July, Kumho Tire's largest shareholder, Xingwei Korea (Double Star) and creditors signed a new shareholder agreement. As the shares transfer restriction period for creditors has expired, they are now able to sell their shares. Xingwei Korea acquired the controlling stake in Kumho Tire in April 2018.

Among the various banks that still own stakes in Kumho Tire, Korea Development Bank is considering on a potential sale of its stake. Among other financial institutions that own stakes in Kumho Tire, there are different views on the timing and method of sale.

Conclusion First

In our view, more creditors of Kumho Tire (such as Korea Development Bank) that are likely to try to sell their shares in Kumho Tire in the next 12-24 months. Therefore, despite the recent improvement in the financial performance of Kumho Tire, we are more concerned about the additional stake sale by the financial institutions that still own 19.2% stake in the company.