China’s Doublestar Tyre Co. that signed an agreement with creditors of Kumho Tire Co. earlier this year to buy a majority stake in South Korea’s second-largest tire maker has officially amended terms for buyout, asking for 16 percent cut in acquisition price to 800 billion won ($707.2 million), citing contingent liability risks including operating losses.

According to Korea Development Bank (KDB) on Wednesday, creditors of Kumho Tire including Woori Bank and KB Kookmin Bank held a shareholder council meeting and discussed whether to accept Doublestar’s request to lower the sales price.

In March, Doublestar signed a share purchase agreement (SPA) with Kumho Tire creditors under terms that allow the Chinese tire maker to cancel the deal if Kumho Tire’s operating profit falls by 15 percent or more on-year by September 23, the deadline to seal the deal.

Kumho Tire has recently been exposed to contingent liability risk - a potential liability that could incur in the future - as the management is in dispute with labor over wage issues. Taking notice of it, instead of canceling the purchase contract with creditors, Doublestar has demanded a 16 percent cut in the sales price from 955 billion won to 800 billion won as compensation for contingent liabilities.

When Kumho Tire creditors and Doublestar signed the share purchase agreement, they set a ceiling of 16.2 percent of the total sales price as compensation for contingent liabilities.

Creditors plan to decide within this week whether to accept Doublestar’s demands. Sources note that creditors were undivided on the issue during Wednesday’s shareholder council meeting.

In such a case, KDB will have to sign a new agreement with Doublestar this month under new terms, which would automatically restore Kumho Asiana Group Chairman Park Sam-koo the right to rebid to gain back ownership in Kumho Tire.

Park, who had the priority to buy back the company under the right of first refusal, was not able to gather as much funds as proposed by Doublestar, leaving him out from the competition.

However, with changes in the sales price, Park would be able to exercise his right of first refusal and re-challenge to buy back Kumho Tire at a different price.

Main creditor KDB plans to ask Park if he wishes to exercise the rights and receive an answer within this month. Creditors are expected to allow Park to form a consortium, which was not allowed when they signed an agreement with Doublestar in March.

An unnamed official from Kumho Asiana Group said that it will review detailed purchase plans once it receives request from creditors to exercise right of first refusal.

As of 1:35 p.m. on Thursday, shares of Kumho Tire were up 2.29 percent at 6,690 won.

By Kim Jung-hwan and Chung Seok-woo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]