FSC vows to decide on Lone Star case this week

The financial regulator said yesterday it will decide this week whether to order Lone Star Funds to sell most of its stake in Korea Exchange Bank.

The Financial Services Commission said in a statement that it will hold a meeting tomorrow about whether to order the U.S. buyout fund to lower its 51.02 percent stake in KEB to 10 percent.

The expected sale order would pave the way for Lone Star’s exit from the local market eight years after it arrived in the country.

The move comes after the FSC ruled the Texas-based buyout fund is an illegitimate major shareholder of KEB following an Oct. 6 verdict that found Lone Star guilty of stock manipulation related to its merger with KEB’s credit card unit in 2003.

Under local banking law, a corporate entity that has violated related rules over the last five years is banned from owning more than a 10 percent stake in a bank.

The decision is expected to expedite Hana Financial Group’s deal to buy KEB, worth 4.41 trillion won ($3.9 billion).

Last year, Hana Financial Group, the country’s No. 4 banking group, agreed with Lone Star to purchase KEB, but the deal has been pending due to regulatory hurdles, leading Hana Group and the buyout fund to extend the agreement to the end of November.

But the FSC said it has yet to decide whether to issue the sell order with punitive conditions attached.

KEB’s unionized workers and politicians have been calling for the FSC to first re-evaluate whether Lone Star is a financial or nonfinancial investor based on the size of the firm’s nonfinancial assets.

Nonfinancial investors are not allowed to hold shares which exceed a 4 percent stake in a local bank.

They claimed the FSC should impose a punitive measure to Lone Star’s stake sale, such as ordering the fund to sell its share in the market in a bid to prevent the buyout fund from pocketing more than twice the money it spent on purchasing KEB stocks.

Lone Star has been attempting to unload its KEB stake and leave the country after first purchasing shares in 2003, but previous negotiations with Kookmin Bank in 2006 and HSBC in 2008 fell through.

Yonhap