Bidding competition for debt-saddled ailing savings banks in business suspension will be launched Tuesday, according to the Korea Deposit Insurance Corp.

The state-run KDIC has decided to make a public notice for sale of the seven savings banks on Tuesday, aiming to select preferred bidders by July.

In a bid to induce close competition and fast conclusion of deals, the government agency will lower the minimum eligibility of potential bidders to companies with assets of more than 2 trillion won ($1.8 billion).

The requirement for participating in the past bidding for Samhwa Savings Bank, which was acquired by Woori Financial Group, was 3 trillion won.

The savings banks are Busan, Busan II, Jungang Busan, Daejeon, Jeonju, Bohae and Domin. All of them were issued sanctions of six-month business suspension last February.

The KDIC plans to accept letters of intention from potential investors by the end of May and let them conduct due diligence on the ailing banks over the next three weeks.

After picking preferred bidders in July, the agency is seeking to finalize the respective deals around mid-August.

In particular, there is a high possibility that the seven banks will be auctioned off as a “package” deal, agency officials said.

For example, the KDIC could select not seven preferred bidders but three preferred bidders by combing two or three savings banks as M&A packages, they said.

A month ago, the Financial Services Commission said it would put the seven savings banks up for auction, saying that the banks were suffering serious problems in their financial status.

Potential buyers include four major financial groups, KB, Woori, Shinhan and Hana, while conglomerate-based financial units have also expressed their willingness to take over the distressed savings banks.

Jungang Busan Savings Bank has been mentioned as the main target of the four financial groups as it is headquartered in Seoul. Its assets and debt came to 846.4 billion won and 828.8 billion won.

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