K bank's recapitalization gets green light from the FSS
K bank's recapitalization was approved by the Financial Supervisory Service (FSS), allowing BC Card and Woori Bank to swoop in with hundreds of billions of won and pull Korea's first online-only bank back from the brink.
After the now approved transactions is completed, BC Card will own 34 percent of the shares, becoming the majority shareholder of K bank, and Woori will own 19.9 percent.
“BC Card has met the standards in three categories, including financial stability and social credibility, to receive approval. Woori Bank also qualifies for criteria on financial stability and social credibility,” the FSS announced.
K bank will issue 239.2 billion won ($2 million) of new shares and 157.4 billion won of convertible preferred stock in the transaction.
The original idea had been for KT to increase its stake from 10 percent to 34 percent, but that plan fell through as a company with a history of anti-trust violations is prohibited from owning more than 10 percent of a financial firm.
Plan B was to have BC Card, which is 69.54 percent owned by KT, lead the restructuring and take KT's stake and the 24 percent KT was to acquire. The card company requested FSS approval in May and acquired KT's 10 percent of K bank in April.
Negotiations dragged on as Woori Bank, the largest shareholder at that point, was hesitant to participate in the recapitalization. On June 26, the bank agreed to join in the rescue, but under the condition that it buy convertible preferred shares.
Before the FSS approval, Woori Bank owned 13.79 percent of K bank, BC Card 10 percent and NH Investment & Securities 10 percent.
The transaction, scheduled for July 28, will bring K bank 400 billion won of fresh capital, taking its capitalization from 500 billion won to 900 billion won.
BC Card will be selling off its 429.4 billion won worth of stock in Purchase, New York-based Mastercard in order to finance its investment in K bank. It will unload all its shares in the company by the end of the year.
K bank was effectively shut for about a year as it did not have enough capital to conduct business. It introduced a savings account in June and some consumer credit products in July.
The online-only bank has been in the red for years and recorded around 24 billion won in operating losses for the first quarter. It has accumulated losses of 290 billion won.
BY KANG JAE-EUN [firstname.lastname@example.org]