KDB criticised for allowing unfair competition

30-Sep-2020 Intellasia | KoreaTimes | 6:02 AM Print This Post

The Korea Development Bank (KDB) is facing sharp criticism over KDB Investment’s recent attempts to acquire Doosan Infracore and Hanjin Heavy Industries & Construction.

Given that both Doosan and Hanjin are undergoing large-scale restructuring under the supervision of the state-run lender, critics pointed out the KDB subsidiary’s bid to take over the key affiliates of the cash-strapped conglomerates could be a conflict of interest.

KDB Investment recently joined hands with Hyundai Heavy Industries to take part in Monday’s preliminary bidding to acquire Doosan’s construction equipment manufacturing arm. The consortium is regarded as the strongest candidate to win the bid, among preliminary bidders including MBK Partners and Glenwood Private Equity.

Because Doosan is under the control of the KDB, the conglomerate virtually needs approval from the state-run lender when it selects the buyer of its subsidiaries.

From that standpoint, industry officials said KDB Investment will be able to access more information and receive preferential treatment from the seller, compared to other bidders. Furthermore, if KDB Investment acquires Doosan Infracore, the Doosan subsidiary will continue to be under the de facto control of the state-run lender.

This will not be different for the Hanjin Heavy deal.

KDB Investment is highly expected to participate in the preliminary bidding next month to acquire the shipbuilder. Another potential bidder is the Korea Real Estate Investment & Trust. According to sources, KDB Investment hired accounting firm EY to get advice regarding the deal.

In response to the criticism, KDB Chair Lee Dong-gull said Doosan is carrying out restructuring on its own.

“The bidders are Hyundai Heavy and KDB Investment, not the KDB,” he said at an online press conference, Monday, declining to mention details about the sale of Doosan Infracore.

The KDB set up KDB Investment in July 2019 to restructure companies under the state-run lender’s control, such as Daewoo Engineering & Construction (E&C). KDB Investment was initially supposed to take over the KDB’s stake in such companies and sell them after normalising them.

However, the lender has been criticised for using its subsidiary to just offer seats to its former and incumbent executives. After its establishment, three KDB officials including vice President Lee Dae-hyun joined the subsidiary. KDB Investment vice President Lim Byung-chul who came from the Korea Institute of Finance is also regarded as a close friend of the KDB chair.

In addition, the KDB has continued to take charge of company restructuring, despite the establishment of KDB Investment. While KDB Investment is only in charge of the restructuring of Daewoo E&C so far, the KDB is still tasked with selling major companies, such as Hanjin Heavy and KDB Life Insurance.



Category: Korea

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