KDB's suspicious internal trading over Hanjin Heavy?

Workers of Hanjin Heavy Industries build ships at a shipyard in the nation's southern port city of Busan on Feb. 21, 2019. Yonhap

By Lee Min-hyung

Korea Development Bank (KDB) Investment's participation in a bid to take over Hanjin Heavy Industries is raising suspicions over the former's possible access to internal information from the KDB, the main creditor of the cash-strapped shipbuilder.

Concern have arisen since a consortium led by KDB Investment jumped into the race to take over Hanjin Heavy valued at around 500 billion won ($443.2 million). The state-run lender established KDB Investment in 2019.

A total of seven consortiums and companies submitted a letter of intent to acquire the shipbuilder. They include the Korea Real Estate Investment & Trust and private equity firms.

But KDB Investment's competitors remain suspicious over whether the bidding process will be carried out fairly amid concerns that the investment arm of the KDB may have already obtained quality information from the creditor and gained an advantageous position even before the bidding competition is in full swing.

Despite the lingering criticism, market analysts argue Hanjin Heavy remains attractive enough for KDB Investment to push for the bid due to its growth potential and profitable real estate assets.

The shipbuilder is showing signs of a stable earnings recovery after reporting an operating loss of 66 billion won in 2018. But the company achieved a meaningful turnaround with an operating profit of 77.1 billion won in 2019.

“The KDB is not the sole decision-maker for the ongoing takeover bid regarding Hanjin Heavy,”a spokesman at the lender said. “Other creditors are also raising their voices, so we cannot act independently for the good of the investment arm.”

The KDB and creditors plan to finalize the bidding process by the end of the year. The creditors and Samil PwC, the lead manager for the sale of Hanjin Heavy, finished accepting preliminary bids Monday.

At the end of 2019, the lender owned a 16.14 percent stake in the shipbuilder, the largest among major investors ― including Woori Bank and NongHyup Bank holding 10.84 percent and 10.14 percent stakes, respectively.

For now, chances remain slim for Hanjin Heavy to encounter another nightmarish experience like in 2016 when its business and earnings deteriorated steeply due to the overall downfall in the shipbuilding industry. Failing to bounce back from its accumulating losses, the company signed a memorandum of understanding for its business normalization with creditors led by the KDB.

KDB Investment is emerging as one of the most aggressive players in the local M&A market. The company is also teaming up with Hyundai Heavy Industries to join a race to take over Doosan Infracore, a construction machinery arm of Doosan Group which is undergoing a painstaking restructuring.

The KDB subsidiary hopes to develop real estate obtained by Hanjin Heavy after taking over the company and also seeks to generate synergy with Daewoo Engineering & Construction which it acquired last year.