KDB Mulls M&As with 2 Banks in S.E. Asia

Moves to prop up Korea Development Bank to be leading IB in Asia by entering project financing markets in the region

Chairman Min Euoo-sung of KDB Financial Holding Co., who also heads the Korea Development Bank (KDB), said he plans to take over two or three local banks in Southeast Asian countries like Thailand and Indonesia this year to make KDB a corporate investment bank representing the whole of Asia.
In an interview with a local daily, Min said the KDB’s focus will be on expanding its financial network in Asia so that it will be able to provide project loans for natural resources exploration projects in the region with funds secured locally through M&As with local financial institutions.
The KDB CEO said the bank is in serious consultations with the financial authorities to promote its overseas operation plans, signaling that the plan has been concluded already, requiring only official approvals.
KDB will also take over a local bank in Uzbekistan to make its local operation the fifth largest in the central Asian country and also has plans to secure part of Eastern Europe’s project financing market.
On the privatization plan for KDB, he said the bank may sell its shares before May 2014, the legal deadline following consultations with the financial authorities. He will try to build up the prices of KDB this year so that its initial public offering prices would be raised to the maximum possible next year.
On the possibility of taking over Korea Exchange Bank (KEB), Min said its price has increased far higher than expected at over 6 trillion won, and with that kind of money, it would be better off for KDB to buy a couple of local banks in Southeast Asian countries in terms of profit potential, although he is aware of the various synergies the bank would get from taking over KEB including a broader deposit base. With the government a major stakeholder in KDB, it would be illegal for KDB to participate in an open bidding for KEB, he said.
On the revitalization of Kumho-Asiana Group, he said the group would have to go through bone-shearing times before it is saved and returns to normal. If the group is put back on the normal operation track after three years, it would be able to win the rights to buy back stakes in Kumho Industry and Kumho Tire.
Min said creditors might have to lose some of their loans during the process of the normalization of the two Kumho companies in poor financial condition, which will require some 4 trillion won to resuscitate. KDB also lost 1 trillion won when it took over Daewoo Construction at an above-market price.
The chairman said if creditors don’t agree with terms of the workout for the two financially troubled Kumho companies, the workout may not be done and KDB’s move to take over Daewoo Construction may also be suspended. The creditors who can exercise the put back option rights should agree to sell the construction firm at a share price of 18,000 won and the difference between the share price and the put back option price of 31,500 won per share should be turned into an investment in the company, Min said, adding that they may be able to make money from the investment. “We need their cooperation,” Min said, as the workout plan is not firmly set with the agreement of creditors required within three months time, otherwise they may have to be put under court management.
Min said workout is the best option for those companies, as it will minimize the losses for the creditors and at the same time protect the health of vendor firms. With regard to taking care of Kumho Industry’s stakes (20.8 percent) in Asiana Airlines, Min said Kumho Industry can turn them over to Kumho Petrochemical with the management right attached as a premium, as it is difficult to return the deal to its original form at this stage.
On selling Korea Express, an affiliate of Kumho Group, he said they can’t afford to sell the profitable trucking firm now as it will deprive the group of its cash income, which will be needed to cover the loss from the sale of Asiana Airlines ― although Kumho Industry’s financials would be improved. nw

Chairman Min Euoo-sung of KDB Financial Holding Co.