Tuesday April 29, 11:02 AM
HSBC extends deadline for six-billion-dollar SKorea bank deal
SEOUL (AFP) - Global banking giant HSBC said Tuesday it has extended by three months the deadline for completion of a six-billion-dollar deal to buy a South Korean bank from US fund Lone Star.
The deadline for its purchase of a 51 percent stake in Korea Exchange Bank (004940.KS - news) (KEB) was due to expire on April 30 but HSBC said in a statement it has been put back until July 31.
The Dallas-based buyout fund confirmed the extension.
South Korea's Financial Services Commission (FSC) had withheld approval for the deal until court cases regarding Lone Star's original purchase of KEB in 2003 are settled.
HSBC said that if FSC approval is received before July 31, the deadline for the deal will be extended by two months from the date of that approval. It (Frankfurt: A0MLX5 - news) said the originally agreed purchase price would remain unchanged.
"The proposed transaction is entirely in line with our stated strategy to focus on high-growth economies and I continue to be of the view that it is in the best interest of all KEB stakeholders and of HSBC," group chairman Stephen Green said in the statement.
FSC chairman Jun Kwang-Woo said earlier Tuesday he wants a swift solution to the legal problems over the sale, adding that the delay is damaging South Korea's overseas image.
"Delaying this matter... is not helpful to the image of Korea, especially the new Korea under President Lee's administration, to the international community," he told foreign correspondents.
"So we need to give a right signal (to investors) at the earliest possible date."
Foreign investment in South Korea decreased in 2007 for the third consecutive year to slightly above 10 billion dollars. New President Lee Myung-Bak, a former business executive, has vowed to reverse the trend.
"I am the CEO of Korea Inc," he told investors in New York during a visit this month, promising to open the country wider to overseas capital.
The American Chamber of Commerce in Korea has previously urged courts to settle cases quickly, saying problems faced by Lone Star are scaring away much-needed foreign investment.
Lone Star has been embroiled in legal problems since it purchased a majority stake in KEB, the country's fifth largest lender, for 1.5 billion dollars in 2003.
Prosecutors have been investigating allegations that KEB's financial health was understated to help Lone Star buy it cheaply. They have accused six people of conspiring to manipulate the figures.
In a separate case Paul Yoo, the head of Lone Star's Korean unit, was sentenced to five years in prison in February on charges of stock manipulation following the takeover of KEB.
The court also convicted Lone Star and KEB of rigging shares and fined them a total of 53 million dollars. Yoo and Lone Star have both appealed.
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