By Kang Seung-woo
Lone Star has reportedly asked the Korean government to give it six months to implement an order to sell its controlling stake in the Korea Exchange Bank, regulators said Tuesday.
The six-month period will allow Lone Star to get the best price out of its deal with Hana Financial, a prospective buyer, analysts said.
The request comes at a time when the Financial Services Commission (FSC) is about to order the Texan buyout fund to dispose of its controlling stake in KEB after a court ruling deprived it of its status as a majority stakeholder.
“We have received a request from Lone Star on the order to dispose of its stake in KEB,” an FSC official said.
He didn’t reveal any details, but Yonhap News Agency reported the company asked for six months to do so.
The FSC’s prospective order is a result of a former employee of Lone Star being convicted of stock manipulation in the firm’s purchase of the spun off KEB credit card arm in 2003.
The Seoul High Court ruled Lone Star and its former Korean unit chief Paul Yoo were guilty of manipulating stock prices and imposed fines of 25 billion won ($22.42 million) and 4.3 billion won on them, respectively. Although they were given one week to appeal the verdict, neither of them did.
According to banking law, an executive or corporate entity that has been convicted of violating the law in the previous five years is banned from owning more than a 10 percent stake in a bank.
As a result, the FSC informed Lone Star, headed by Chairman John Grayken that it will order the company to sell 41.02 percent of its total stake in KEB.
In complying with any FSC sale order, Lone Star wants to take full advantage of the implementation period that the financial regulator may grant.
A period shorter than six months is unfavorable to Lone Star because Hana Financial is likely to ask for a price renegotiation for the sale, while a longer period enables the fund to search for another buyer. The expiration date of a deal that Hana and Lone Star reached in November last year valued at 4.41 trillion won is Nov. 30.
Another hot topic is whether the FSC will take punitive action in the stake sale order.
KEB union members and civic groups are pressing the FSC to order a punitive sale measure or a public sale rather than simply ordering Lone Star to sell its stake to Hana Financial, which they insist will reduce the company’s profit.