Lone Stars eligibility as KEBs biggest shareholder to be checked

Korea's financial regulator said Wednesday it will determine the eligibility of U.S.-based Lone Star Funds as the biggest shareholder of Korea Exchange Bank (KEB).

The Financial Services Commission (FSC) said it will make a decision on the issue at its regular meeting scheduled for later in the day. Lone Star bought a controlling 51.02 percent stake in KEB for 4.69 trillion won ($4.14 billion) in 2003.

The watchdog, however, said it will not review in the meeting whether to approve Hana Financial Group Inc.'s purchase of KEB and that decision will be delayed for an unspecified time.

Hana Financial struck a deal with Lone Star to buy the stake in KEB in November and is awaiting the FSC's final permission to consolidate the bank unit as its affiliate.

The FSC's decision not to deal with the approval issue deals a blow to Hana Financial's plan to acquire KEB, the fifth-largest bank in South Korea, within March.

The FSC had reportedly planned to grant permission for the transaction this month but reversed its plan after the Supreme Court convicted the head of the fund's local unit on March 10 for issuing a false disclosure to manipulate stock prices before his company bought the credit card unit of KEB in 2003.

The court said Yoo Hoi-won unveiled the capital write-down plan to buy the card firm at a below-market price, overturning a lower court's decision.

Lone Star later integrated the card unit into KEB, which the buyout fund had previously purchased.(Yonhap)