An international ratings agency said Friday it has placed Korea Exchange Bank on review for a possible upgrade after global banking giant HSBC agreed to buy a controlling stake. Moody's Investors Service said the review would consider the support that the country's sixth-largest bank could enjoy "under a financially stronger and a higher-rated strategic shareholder."
There remain obstacles to the completion of the deal, which is "contingent on the receipt of regulatory approvals, and is complicated by pending legal action in Korea," Moody's said. HSBC said Monday it had agreed to buy a 51.02 percent stake in the bank from US private equity fund Lone Star for about 6.3 billion dollars in cash.
But South Korea's financial watchdog said it would not approve the deal until legal cases over the bank's previous sale to Lone Star are settled. Moody's said it was unclear if HSBC and Lone Star can conclude the transaction within the deadline. HSBC has said the deal can be scrapped if Lone Star fails to solve legal problems by April 2008.
Lone Star bought 50.5 percent of KEB for some 1.5 billion dollars in 2003 and later increased its stake. Prosecutors have accused six people, including a former KEB president, of manipulating figures on KEB's financial health to pave the way for the private equity fund to acquire the bank.
Lone Star was separately accused of manipulating the share price of KEB's credit card unit so it could be acquired cheaply by the main bank. The US firm denies the allegations and says the charges were driven by a latent hostility towards foreign investors.
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