Investors in 4 Failed Banks May Get Some Relief

Minority shareholders of four local banks whose capital was written off last December may be given preferential rights to buy bonds with warrants to be issued by Woori Finance Holding Co., a government-run entity.

The banks are Hanvit, Peace, Kwangju and Kyongnam.

The government is considering allowing shareholders who accept an interest rate lower than that of bank time deposits to purchase the bonds, which would give them the right to buy new shares in Woori at the face value of 5,000 won ($3.85) a share, a government official said Sunday on condition of anonymity.

The decision to grant the rights is seen as a compromise; the government wants to help the battered shareholders recoup some of their losses. But critics complain that such assistance is unfair.

The interest rate on the bonds with warrants may be set at a level 0.5 to 1 percentage point lower than the rate on time deposits, and holders will be allowed to sell the warrants separately, the official said.

Investors who buy the debt would be able to exercise their right to purchase new shares issued by the holding company if they are willing to take the low interest rate for about two years. Then they can take profits if Woori's stock price rises above 5,000 won.

by Huh Kwi-sik