Is Carlyle ready for shakedown on Hana deal?

By Kim Tae-gyu

Will Hana Financial’s takeover of Korea Exchange Bank be put under the same regulatory scrutiny as Hyundai Group underwent before its bid for Hyundai Engineering and Construction (HE&C) went haywire?

The bone of contention that torpedoed Hyundai Group’s bid for HE&C was the nature of the 1.2 trillion won the conglomerate borrowed from Natixis. The 1.2 trillion won was a part of Hyundai Group’s 5.51 trillion won HE&C bid.

Creditors of HE&C rescinded a contract they signed with Hyundai Group after rejecting the French bank’s certificate vouching for the authenticity of the deal. Korean regulators vowed to scrutinize funding for any future big merger and acquisition deals.

That sets up Hana’s surprise deal with Lone Star, the private equity fund that holds a controlling stake in the KEB, for close examination by the regulator.

If the same rules are applied to the Hana-Lone Star deal, it would make the regulators demand that Hana’s prospective partners — reportedly the Carlyle Group, MBK Partners, Affinity Equity Partners and Corsair Capital — disclose the nature of their funds.

Hana Financial is striving to raise about 1.5 trillion won in loans by issuing corporate bonds in order to fund a 4.7 trillion won buyout of Korea Exchange Bank from Lone Star.

The Seoul-based group also thinks it can raise around 1.2 trillion won through a rights issue and the remaining 1.9 trillion won will come from dividends from its affiliates.

“Hyundai Group basically strived to fund the takeover through debt financing while we look to adopt equity finance, which has nothing to do with indebtedness,” a Hana Financial spokesman said.

Despite Hana’s assurances, it remains to be seen what new criteria the regulators will come up with to ensure that funding is legitimate.

Hana’s KEB deal is fraught with other potential problems.

Hana Financial is required to finance more than half of the funds outside of the group to scoop up KEB. This is also the opinion of many KEB unionists who are against the deal.

“We are very concerned that Hana Financial hopes to bite off more than it can chew as it turns to debt too much. Over the long haul, that is feared to hurt both Hana and KEB,” KEB trade union spokesman Kim Bo-heon said.

“Worries have arisen regarding the rights issue, too. We suspect that Hana might try to find equity investors through secret deals promising a certain level of profitability. If that is true, we think it should give up the bid for KEB.”

The 1.9 trillion won in dividends has also come under criticism as the amount is unusual. Hana Financial got up to 8,800 won per share in dividends from its stake in the group’s iconic affiliate, Hana Bank.

The resulting dividends of 1.93 trillion won represents approximately 22 times the group’s 879 billion won in dividends for the previous year.

Many Korean people tend to shudder at the mention of private equity funds due in no small part to Lone Star, the Dallas-based entity that invested $1.2 billion to snap up KEB in 2003.

Lone Star has suffered constant accusations that the closed-end fund is busy retrieving its investment via dividends or disposal of stakes without caring much about the management of the lender.

In 2006, the hedge fund agreed to sell a controlling stake in KEB for about $6 billion. But the contract fell apart in the face of a public backlash, as people became angry at the huge profits Lone Star would reap.

Two years later, Lone Star agreed to sell KEB to London-headquartered HSBC Holdings at $6.3 billion but the deal also collapsed in the midst of the unprecedented global financial crisis.

Hana’s agreement with Lone Star has also generated controversy as demonstrated by the claims of Rep. Ooh Che-chang of the main opposition Democratic Party late last month.

In the contract between Hana and Lone Star, the two-term lawmaker claimed that Hana deflated the price of KEB. He contended that Hana promised to pay a significant amount on top of 4.7 trillion won. The Financial Supervisory Service said that it will look into it.

The disputes accelerated after Hana Financial’s rights issue will reportedly involve the private equity funds Carlyle Group, MBK Partners, Affinity Equity Partners and Corsair Capital.

In particular, the Washington-based Carlyle Group had something to do with Korea in the past — it dipped its toes in Korean waters in the aftermath of the 1997-98 Asian financial crisis.

Carlyle bought a controlling stake in the country’s KorAm Bank for $450 million. The bank was sold to Citigroup for $2.7 billion in 2005 in a deal that marked the single-largest private-equity exit in Asia back then.

Hana Financial said that it would put forth efforts to find strategic investors, who can be of help in running its units. But it said financial investors like hedge funds can be opted for should they present attractive offers.

“We have a preference for strategic investors. However, we have no reason not to accept financial investors including private equity funds if they are ready to buy our stocks at attractive conditions from our perspective,” the Hana spokesman said.

KEB unionist Kim lashed out at the stance of Hana Financial.

“At first, Hana Financial said that it will draw strategic investors. Now it continues to back off. We have had negative influences from hedge funds so many times and we hope Hana will not resort to them,” Kim said.

하나금융 칼라일과 엮이나?

현대그룹이 현대건설 인수할 때와 같이 하나금융도 외환은행 인수와 관련 비슷한 조사를 당할까?

현대건설의 경우 나타시스로부터 빌린 1조 2,000억 원이 문제가 되어 결국 현대건설의 채권단이 우선협상대상자의 지위가 박탈당했다. 그러면서 금융당국은 앞으로 대규모 인수/합병에 대해 자금계획을 집중적으로 들여다 볼 것이라고 밝혔다.

그렇다면 과연 하나금융과 외환은행을 소유하고 있는 론스타와의 4조 7,000억원에 달하는 계약은 어떻게 되나? 하나금융은 2조 원 가까운 내부 자금에 1조 2,000억 원은 신주 제 3자 배정을 통해, 나머지 1조 5,000억 원만을 회사채를 통해 조달할 것이라고 밝혔다.

하나금융 측은 현대그룹의 경우 대규모 빛이었지만 하나금융은 자기자본의 확충을 통한 인수이기 때문에 경우가 다르다고 주장했다.

하지만 외환은행 노조에서는 기본적으로 하나금융이 인수여력이 없으면서 무리하게 외환은행을 인수하려고 하고 있고 신주 제 3자 배정도 전략적 투자자가 아닌 재무적 투자자와 협상 중이라고 주장한다.

하나 금융은 칼리일과 MBK 파트너스 등의 사모펀드와 신주 제 3자 배정과 관련해서 협의 중이라는 보도가 있었다. 외환은행의 노조는 자신의 폐해에서 보았듯이 은행의 매매에 더 이상 사모펀드과 관여되어서는 안된다고 주장한다.