KDB Eyes Global Expansion

State-run bank sells bonds in Swiss bond market and looks for M&A deals overseas

The state-run Korea Development Bank (KDB) said on Aug. 27 that it has sold 200 million Swiss francs ($194.7 million) worth of bonds to investors in the Swiss bond market.
The debt matures in four years and carries an interest rate of 1.75 percent, which is lower than the return on similar U.S. dollar and Swiss franc bonds, the bank said.
The proceeds from the bond sales will be used to repay maturing foreign debts or extend foreign currency loans, and KDB plans to raise foreign currency via bond issuances in such niche markets as Southeast Asia and Switzerland. KDB also plans to sell its debts in China sometime during the fourth quarter of this year, the bank said.
So far this year, KDB has issued bonds worth $750 million in the United States and 27 billion yen ($319 million) in Japan.
Over the past few decades, KDB has played a leading role as a policy lender in transforming Korea into a manufacturing powerhouse from a war-ravaged agrarian economy by supporting local businesses and government-led construction projects.
Ahead of privatization, the lender has redefined its position as a leader in financial globalization. It is now seeking to play a key role in exporting “finance” abroad by capitalizing on its dominant position in the area of project finance (PF).
PF is the financing of long-term infrastructure and industrial projects. Debt and equity used to finance the projects are paid back from the cash flow generated after the plan has been implemented.
KDB is a pioneer of the domestic PF market. It completed the first-ever PF deal by playing a key role in financing the construction of Incheon International Airport Highway in 1994. Since then, the state-run lender has led the industry by achieving 289 deals valued at 30.5 trillion won.
As a result, its market share has increased dramatically. KDB occupied one third of the market in 2006 and nearly doubled one year later, taking up 59.1 percent of the local PF industry in 2007. It reached 66.7 percent in 2008 and last year 85.2 percent of PF deals were completed by the lender.
With such remarkable performance, KDB has gained growing recognition from the global business community. Project Finance Magazine, a monthly trade journal published by Euromoney Publications, awarded the Asia-Pacific Road Deal of the Year 2009 to KDB for its PF deal for the West Suwon-Uiwang toll road.
“The deal backs the development of the West Suwon-Uiwang tollroad project, one of very few major Korean infrastructure deals to close last year in a market where development has been hit hard by the global liquidity crisis,” the magazine said on its official website.
KDB has set its own M&A business model since it started in 1996. The bank launched a special unit in charge of M&A business in 2003. Since then, it has struck several big deals, such as the sales of Pan-Ocean Merchant Marine and New Core in 2004. The scales of the two deals were estimated at 415.9 billion won and 407.9 billion won, respectively.
In 2005, KDB was awarded the “Best M&A Deal Award” from FinanceAsia, a monthly magazine based in Hong Kong, for striking the biggest M&A deal at the time ― Hite’s acquisition of Jinro, the nation’s leading distiller back then ― for 3.4 trillion won.
KDB’s M&A story has not been limited to domestic success. The bank has been pushing for a piece of the overseas market, achieving a great many new deals.
In 2007, KDB was in the spotlight from M&A industry experts at home and abroad for helping Doosan Infracore acquire Ingersoll Rand Bobcat at the price of $4.9 billion, the biggest M&A deal struck by domestic M&A specialists.
Doosan’s purchase of Bobcat and two other units of U.S.-based Ingersoll Rand was the fourth biggest takeover in 2007 and is the largest deal in which a domestic company played the role of a buyer targeting a foreign firm.
KDB also advised LS Cable to buy Superior Essex for 1 billion won in 2008. Superior Essex is a global leader in the design, manufacturing and supply of wire and cable products. KDB vows to provide the best service for potential M&A customers with its abundant experiences. nw

Chairman Min Euoo-sung of the KDB Financial Group.