Kumho Shares on Rollercoaster Ride
By Lee Hyo-sik
Staff Reporter
Kumho Asiana Group shares have been on a rollercoaster ride in recent days, with its fate hanging by a thread after failing to raise money through the sale of Daewoo Engineering & Construction (E&C).
Stocks of Kumho Industrial and other units have been on a downward trend over the past year since concerns over the group's liquidity crunch surfaced. The nation's once-ninth largest conglomerate had tried to raise funds from additional investors to service the put option deal it signed with financial investors when taking over Daewoo E&C in 2006.
After having failed to secure the necessary capital, it then tried to resolve its cash flow problems by selling the builder and other units to strategic investors and implementing self-imposed restructuring measures.
But its sales attempt failed and it had no other choice but to go to the state-run Korea Development Bank (KDB) and other creditors, yielding managerial control over Kumho Industrial and Kumho Tire in return for fresh capital.
On Dec. 30, Kumho Asiana Group filed an application with its creditors for a debt repayment program for the two struggling units in a bid to tide over its growing cash flow problems. It also subjected Kumho Petrochemical and Asiana Airlines to undergo voluntary restructuring in cooperation with creditors.
Following the news, shares of the group units plunged, with Kumho Industrial and Kumho Tire hitting their daily limit down and continuing to fall over several following trading sessions.
But after KDB and creditors approved a debt repayment program for Kumho Industrial and Kumho Tire on Wednesday, Kumho stocks bounced back for the second straight trading session.
On Thursday, Kumho Industrial shares closed at 6,280 won, up 3.63 percent from the previous day. Kumho Tire surged 14 percent to 3,500 won, with shares of Kumho Petrochemical rising 1.82 percent to 22,400 won. Asiana Airlines also jumped 1.94 percent to 3,940 won.
``Kumho Asiana Group shares have rebounded, following the creditors' approval of the debt workout program for Kumho Industrial and Kumho Tire. Retail investors are the main buyers and they think Kumho stocks have hit bottom. But it is too early to say whether stock prices will continue to go up in the future,'' Kyobo Securities & Investment senior economist Joo Sang-chul said.
Joo said the group still faces an uncertain future but many investors lean toward the possibility that it will be reborn after a stringent creditor-led workout program. ``Retail investors are betting that Kumho will survive and its share prices will be much higher than they are now. They are taking a high-risk and high-return strategy. But unless foreign and institutional investors jump on the bandwagon, a substantial rebound will be unlikely.''