The Korea Herald


Hana Financial defends lending to Lone Star

By 김연세

Published : July 6, 2011 - 19:39

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Hana Financial Group chairman Kim Seung-yu Hana Financial Group chairman Kim Seung-yu

Hana says regulators issued no edict against loan

Hana Financial Group has refuted criticism that it issued loans to Lone Star Funds, the biggest shareholder of Korea Exchange Bank, in defiance of regulators’ instruction.

A Hana official denied the speculation that “the financial group made a lending totaling 1.5 trillion won ($1.4 billion) despite tackling not to do it from the financial authorities.”

He stressed that any banks, including Hana Financial Group and Hana Bank, are not obliged to consult with financial regulators.

“As far as I’m concerned, it is not the fact that regulators instructed us not to issue the loans to Lone Star,” he said.

Spokesmen of the Financial Services Commission and the Financial Supervisory Service also said it would be alright as long as a commercial bank informs the regulatory body of its lending shortly after issuance to customers.

In case of Lone Star Funds, it had to notify the Bank of Korea under relevant laws as it is non-resident.

Market observers including Hana spokesmen alleged that the BOK had consulted the issue with the regulators.

The U.S.-based fund could obtain the approval for the planned loans as the central bank accepted the borrowing application.

Hana Financial, which made a preliminary contract to take over the majority of KEB shares from Lone Star last November, had to see their memorandum of understanding expire on May 24.

While there are speculations that Hana has failed to acquire KEB in effect, the group has been striving to extend the deal.

More specifically, instead of extending the deal, Hana is seeking to lower the takeover price through possible renegotiations.

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.

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 in Japan, demanding regulatory sanction against the buyout fund.

He has called for the FSC, 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.

By Kim Yon-se (