(2nd LD) Kumho Asiana Group to sell its stake in Daewoo Engineering

(ATTN: ADDS background, main creditor KDB's responses in 7-8 para, last 2 paras)
SEOUL, June 28 (Yonhap) -- Kumho Asiana Group, South Korea's seventh-largest
conglomerate, said Sunday it will sell its controlling stake in Daewoo
Engineering and Construction, in an apparent effort to avert a worsening
liquidity problem.
Kumho bought a 72.11-percent stake in the nation's leading builder in June 2006
for 6.42 trillion won (US$5 billion), 3.5 trillion won of which was funded by
banks and other financial firms.
At the time, the group offered a put-back option under which it promised the
financing providers it would buy back the builder's shares by December 2009 if
the stock price fell below 32,000 won.
Daewoo Engineering shares hovered above 30,000 won in late 2007, but have
continued to slide on concerns about a slowdown in the construction sector. They
closed at 12,850 won on the Seoul bourse Friday.
"We have decided to sell our stake in Daewoo Engineering to completely resolve
concerns stemming from the put-back option," Kumho said. "We will determine the
scale of the sale after consulting with our main credit bank and counselors in a
way to minimize possible losses and reduce the burden on prospective purchasers."
Kumho added that it will soon select an agency that will spearhead the sale and
determine details including its selling method.
The decision comes after the group sought in vain for new investors by the end of
July -- a deadline agreed with its main creditor, Korea Development Bank (KDB) --
in hopes they would help Kumho out of a possible liquidity shortage caused by the
put-back option.
KDB said that the deadline is now invalid, adding that it will begin talks with
Kumho soon on its sale of Daewoo Engineering.
The group, which also owns the nation's second-largest passenger carrier, Asiana
Airlines, has been plagued by growing concerns it might experience a severe cash
shortage since its purchase of Daewoo Engineering.
In an effort to dispel such jitters, Kumho announced a set of measures last July
to raise about 4.57 trillion won by selling properties and securities owned by
its affiliates.
Still, shares of Kumho have plunged over the past years. Its share price, which
hovered near 90,000 won in late 2007, closed at 16,100 won Friday.
Established in 1973, Daewoo Engineering is the nation's leading construction firm
in terms of building capacity. Hit by a protracted economic slump, however, it
has been struggling recently with declining orders.
The company earlier reported that its first-quarter net income tumbled 78 percent
from a year earlier due to a growing inventory of unsold apartments.
kokobj@yna.co.kr
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