The Korea Herald


Regulator sets April date for decision on Lone Star

By 황장진

Published : April 3, 2011 - 19:25

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Korea’s top financial regulator has said the watchdog will push to make a final decision this month over whether Lone Star Funds has the legal right to be the top shareholder of Korea Exchange Bank.

Financial Services Commission Chairman Kim Seok-dong said in a meeting with reporters, “We are working to make a final decision on Lone Star’s eligibility in April.”

The regulator is expected to deliberate on the matter on April 6 and 20 during its regular semimonthly decision-making councils.

Kim’s comments came after the FSC decided in mid-March to delay the decision after the Supreme Court convicted Lone Star’s former local head of illegally purchasing KEB’s credit card unit in 2003.

The watchdog cleared one of the major hurdles for Lone Star to win eligibility status by concluding the fund is a financial-oriented investor that could legally hold more than a 9 percent stake in a local financial company. The FSC, however, added that it needs more time to legally determine whether the recent court ruling should constitute a reason to deprive Lone Star of its eligibility.

According to local banking laws, if Lone Star is to be eligible, the company must be clear of legal violations for the last five years.

The eligibility decision is a critical prerequisite for Lone Star to execute its November deal with local banking group Hana Financial Group Inc. to sell its 51.02 percent stake in KEB.

The fourth-largest financial giant raised the 4.69 trillion won ($4.3 billion) needed to take over the controlling stake and is awaiting final FSC approval to consolidate KEB as its new bank unit, a decision which can only come upon the FSC’s approval of Lone Star.

Lone Star bought the controlling KEB stake for 1.4 trillion won in 2003. Last month, the Supreme Court overturned a lower court’s previous not-guilty ruling for local Lone Star head Yoo Hoi-won, who purchased the KEB’s credit card unit, which was later consolidated into KEB.

Yoo is suspected of having announced a capital-reduction plan in order to drive down stock prices of the credit card company in 2003 before buying it at a low price.

Under local banking law, a company is classified as an industrial group or a non-financial player if more than 25 percent of its capital is invested in non-financial firms or its assets of such firms top 2 trillion won.

A non-financial player cannot hold more than a 9-percent stake in a bank, which means that if Lone Star was deemed an industrial capitalist, the private equity fund would have to unload more than 41 percent of its stake in KEB. 

(Yonhap News)