Kumho Petro to graduate from 'debt workout' in Q3

By Kim Yoo-chul

Kumho Petrochemical has confirmed a plan to leave its debt workout program in the third quarter of this year after management reached a broad consensus for early graduation.

In June 2009, the state-run Korea Development Bank (KDB) and other creditor banks agreed to put the company under supervision to improve its financial soundness and normalize operations, meaning that KDB, as the lead creditor, has control over all aspects of its operations.

The company signed an agreement to join the debt rescheduling program, under which its executives managed the company in consultation with creditor banks.

``We expect to graduate from the current program in the third quarter of this year. We are confident that we will meet key conditions for an early graduation,’’ said Cho Kyu-jeong, head of the company’s public relations, by telephone, Thursday.

``Time is ripe for boosting our corporate awareness. It’s likely that our CEO Park Chan-koo will hold a press conference in the third quarter to talk about new business strategies,’’ said Cho.

This is the first time the company has unveiled the timing of its exit from the debt retooling program. Cho said it will increase its investment in its turbine-making plants in the southern industrial city of Yeosu.

For an early graduation, the KDB asked Kumho to meet four requirements _ achieve a revenue target for the two years after the agreement, strengthen financial soundness so it could raise capital on its own in the money market, reduce its debt-ratio below 200 percent and offer a clear repayment timetable for the remaining debt after leaving the workout program.

The firm reported record annual revenue and operating profit in 2010 and 2011. Last year, it reaped 6.46 trillion won, while the operating profit reached 842 billion won.

Another signal was that its credit rating was improved to A- by the Korea Investors Service (KIS), its highest credit rating since the company was put under the control of the KDB, according to company officials.

KIS said the improvement of the rating was because of improved financial soundness and profits. As of the end of May, the firm’s debt ratio stood at 202 percent.

The company plans to invest 430 billion won in setting up turbines at its existing plant in the city of Yeosu by the end of 2015. It expects the plant to generate addition 640 billion won in sales from 2016 thanks to the factory expansion, according to Cho.

The company has quadrupled its sales in a decade, and this year analysts expect $5 billion in revenue because of rising car sales worldwide and higher prices for the raw material for synthetic rubber.

``We will try our best to increase revenue and profit this year, as well. We’ve expanded last year and this year. We have been improving efficiency,’’ Park Chan-Koo recently told The Korea Times.

Korea Investment and Samsung Securities set 160,000 won and 163,000 won as their target prices on Kumho Petrochemical shares, respectively.