The deal to sell South Korea’s industry second Kumho Tire to smaller Chinese rival Doublestar Tyre is de facto dead as the Korean creditor banks on Tuesday decided to reject the new term demands by the Chinese company and end negotiations.

Shares of Kumho Tire were down 12.2 percent at 5,780 won ($5.09) as of 1:25 p.m. Wednesday.

Creditors will send the request to nullify the share purchase agreement signed in March this week. If the Qingdao-based company agrees, the deal is officially killed. Negotiations can start from the scratch if the Chinese tire maker decides to rebid.

Doublestar Tyre recently asked creditors axe the sales price from original 955 billion won ($843.9 million) to 800 billion won in compensation for contingent liabilities as Kumho Tire’s sales plunged and losses widened amid uncertainties over the company’s sales prospects. The creditors initially accepted the demand, but the Chinese firm took a step further, calling for additional 80 billion won cut or allowing it to walk out of the deal if the Kumho Tire’s third-quarter further deteriorates.

Creditors conditioned that they could agree if Doublestar promises new investment in Kumho Tire and ensures job security for at least five years. They decided to break the deal upon lukewarm response from the Chinese bidder, a creditor bank source said.

Separately, Kumho Tire creditors requested Kumho Asiana Group Chairman Park Sam-koo to present by Sept. 12 an outline to save Kumho Tire from further troubles. They warned that they will remove Park and other senior executives from office if they are not satisfied with their action plan.

Park, who has been bidding to recover the tire company he handed over to creditors amid group-wide liquidity crisis in 2009, vowed to do everything to normalize the company. Some of the actions could be selling the money-losing manufacturing operation in China.

Park who has the right of refusal allowing him to win back the company if he could match the price by the preferred bidder has a chance to rebid for Kumho Tire if Doublestar officially pulls out of the deal.

By Kim Jung-hwan and Chung Seok-woo

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