FSC hints at ruling against Lone Star ownership


Hana Financial Group is striving to maintain its position as the provisional acquirer of Korea Exchange Bank after the preliminary deal with the bank’s biggest shareholder expired a week ago.

Though Hana Financial officials had said the group would soon announce the extension of the deal with U.S.-based Lone Star Funds, which holds a 51 percent stake in KEB, the group has yet to confirm anything between extension and breakdown.

Further, the Financial Services Commission recently launched its probe into allegations that Lone Star has been an ineligible shareholder of KEB as its non-financial assets surpassed 2 trillion won ($1.86 billion).

As Lone Star has faced criticism for concealing the facts involving its non-financial assets, as well as alleged manipulation of stocks, Hana Financial has also been criticized for not dropping the deal with the U.S. fund.

“I don’t understand why chairman Kim has been desperate to take over KEB amid the situation under which even financial regulators postponed the process of whether to approve or reject the deal,” a KEB union member said.

According to FSC officials, the regulatory body is considering depriving Lone Star of the right of majority shareholder of the bank if the court rules that the fund engaged in fraudulent stock trading.

The verdict is expected in the coming months.

Rep. Lim Young-ho of the Liberty Forward Party has said a unit of Lone Star owns 130 golf courses worth about 3.7 trillion won ($3.36 billion) in Japan, demanding regulatory sanction against the buyout fund.

He called for the Financial Services Commission, which has been probing Lone Star’s shareholder eligibility, to order the fund to sell most of its stake in KEB.

The nation’s banking laws ban an investor with its non-financial assets exceeding 2 trillion won from controlling a Korean bank.

According to the lawmaker and KEB unionized workers, the financial authorities failed to obtain the document from Lone Star.

On March 16, the FSC said in a statement it “believes that Lone Star is not a non-financial investor.” It added that an additional review of whether the fund satisfies the full requirement to become the majority shareholder of KEB would be needed.

The new allegations involving the golf courses in Japan could affect the FSC, while the regulatory body said on May 12 that it would indefinitely delay its ruling on the fund’s eligibility.

Should the FSC rule that Lone Star is not a financial investor, the fund would be forced to dispose of 41 percent stake of the total 51.02 percent stake in the bank. And its voting right would be slashed to a maximum of a 4-percent stake.

By Kim Yon-se (kys@heraldcorp.com)