SKorea orders US private fund to sell local bank

AP News
Posted: Nov 18, 2011 6:34 AM
SKorea orders US private fund to sell local bank

South Korea's financial regulator cleared the way Friday for U.S. private equity group Lone Star to sell its controlling stake in a once-troubled South Korean lender.

The Financial Services Commission said it has ordered Lone Star to sell at least 41 percent of its stake in Korea Exchange Bank within six months, clearing the last hurdle for the fund to sell its entire ownership and take profit.

Dallas, Texas-based Lone Star took over KEB in late 2003 when the lender was in financial trouble by purchasing a 51 percent stake for about 1.4 trillion won, or $1.2 billion at current exchange rates.

Lone Star has been blocked for years from selling KEB amid legal disputes over the acquisition. The fund has also been plagued by hostile local media and public opinion regarding the activities of foreign buyout firms.

Earlier this year, South Korea's Supreme Court reversed a 2008 high court ruling that had acquitted a fund official over allegations of stock price manipulation.

Lone Star has consistently denied any wrongdoing related to the purchase of KEB and has argued its rehabilitation of the bank has been good for South Korea's economy.

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Lone Star agreed last year to sell its controlling stake in KEB to South Korea's Hana Financial Group, moving a step closer to its goal of selling the bank. South Korea's Fair Trade Commission gave approval for the deal in March this year.

If the 4.7 trillion-won deal is carried out between Lone Star and Hana, the U.S. fund would realize a tripling of its original investment.