KDB Investment closer to acquiring Hanjin Heavy

A Hanjin Heavy Industries shipyard in the southern port city of Busan / Yonhap

By Lee Min-hyung

With Korea Development Bank (KDB) accepting three final candidates for the acquisition of Hanjin Heavy Industries, anticipation is growing that one of the consortiums led by KDB Investment could be closer to becoming the preferred bidder for the long-awaited deal.

KDB became the largest shareholder of the cash-strapped shipbuilder by obtaining a 16.14 percent stake in the company. The state-run lender has also taken a dual role as a main creditor of Hanjin Heavy after signing a memorandum of understanding over the restructuring of the shipbuilder in November 2015.

Hanjin's years-long self-rescue efforts bore fruit, with the company making a meaningful rebound in 2019 reporting an annual operating profit of 77 billion won. The company suffered from a net loss of over 1 trillion won in 2018 and fell into a state of capital erosion, hit hard by slowdown of the industry.

The rapid earnings rebound has attracted the attention of major investors here. In October, a total of seven consortiums ― including KDB Investment and some private equity firms ―submitted a letter of intent to take over the shipbuilder.

But with KDB Investment being included among the final three candidates for the acquisition of Hanjin Heavy, the possibility of the consortium winning preferred bidder status is growing.

KDB Investment is a 100 percent owned subsidiary of KDB, so market watchers remain pessimistic over whether the other two contenders will be able to compete at a time when the rival bidder's mother company exudes such influence on Hanjin Heavy.

KDB said Monday the KDB Investment-led consortium would compete with the Korea Real Estate Investment & Trust and an NH PE-Opus consortium.

KDB plans to announce the preferred bidder as early as next week after an outside consultancy finishes reviews on the three contenders' bidding proposals.

"The third-party consultancy will carry out detailed reviews throughout this week in an independent manner, and plans to confirm the final candidate sometime next week," an official from the creditor said.

Regarding the concerns that KDB may use its influence for its investment arm to win the bid, the lender reiterated its earlier position that it is not the sole creditor over the deal.

But KDB is in a position that discussions are still underway among the lender and a group of other creditors, so it cannot make independent decisions for the benefit of the investment arm.

"A shareholder consulting body will make the final decision after taking into account the upcoming reviews from the outside consultancy," the official said.

The regional community of the southern port city of Busan where Hanjin Heavy's major shipyards are located strongly denounced KDB for "seeking to sell off the shipbuilder in a rash manner" by using its investment subsidiary.

"KDB Investment aims to reduce the workforce and push for commercial development of real estate near shipyards," said a civic group consisting of the Hanjin Heavy union and locals.

It urged the state-run bank to drop the plan, as the KDB Investment consortium consists of the company and a private equity fund that has no relation to the shipbuilding industry.

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