Lone Star loses key case in Korea
Korea Exchange Bank, an albatross of an investment for private equity player Lone Star, may now see its sale controlled by the state, at the cost of finance Hana Financial’s future. October 06, 2011 | Peter HoflichWhen Lone Star Holdings bought a 51% stake in Korea Exchange Bank (KEB) in 2003, it was the third private equity player in Korea to buy a majority share in a bank after Newbridge (Korea First Bank) and Carlyle (KorAm). Those two players are long-gone, having realised billion-dollar returns on their investments by selling them to Standard Chartered and Citi respectively, but Lone Star still lingers, since 2004 in the crosshairs of irate ex-staff who have egged on prosecutors to take up multiple cases against the investors to prevent their exit from the scene. Lone Star seems to have played every card in its hand to win back its good name and to divest this stake, including being found innocent of charges brought against it, all to no avail; a Korean court revived one of these charges, with judge Cho Kyung Ran today finding Lone Star and its former country head Paul Yoo guilty of stock manipulation and other dirty tricks. Yoo was sentenced to three years in jail, and Lone Star was fined $21 million. Both are sure to appeal, further extending the agony of the bank and its unhappy owner. The incident has dragged on for far too long and has sullied Korea’s reputation as a place for non-Koreans to conduct business. National pride seems to be a key motivator in the case. After two private equity firms realised enormous profits, often through sophisticated tax-saving structures, an incensed public—conveniently forgetting that its insolvent lenders had once been desperate for investment—lashed out at the only firm it could, the hapless Lone Star. Banks are not meant to be run by private equity investors forever, no matter what their nationality, but proceedings against Lone Star to prevent a third “vulture fund” from benefitting from Korean assets have kept Lone Star in KEB so long after its rehabilitation that the bank seems to be stuck in a prison of its own, neither captain of its own fate nor in the hands of an owner that could deploy its resources ef... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: app, Asset Management, Trustees and Custodians, Korea, Markets & Exchanges, Operational Risk, Risk and Regulationapp,Trustees Custodians and Depositories,Korea,Markets Exchanges,Oprisk,Risk and Regulation, app,Asset Management, Trustees and Custodians,Korea,Markets & Exchanges,Operational Risk,Risk and Regulation, Keywords:Lone Star, Hana Financial, Korea Exchange Bank Lone Star, Hana Financial, Korea Exchange Bank
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