Moody’s Investors Service has confirmed the following ratings of Korea Exchange Bank (KEB): global local currency deposit of A2 and foreign currency senior/subordinated debt of A2/A3. All the ratings carry a stable outlook.
The action effectively removes the review for possible upgrade. The review was initiated on 7 September 2007, following HSBC Asia Pacific Holdings (UK) Limited’s (HSBC Asia; rated B+/Aa1) agreement to buy a controlling 51.02% stake in KEB from Lone Star. On 2 May 2008, the review was extended when HSBC Asia and Lone Star announced an extension of the deadline to 31 July 2008, from 30 April 2008.
“Although the agreement has not been officially terminated, Moody’s is removing the review for possible upgrade due to the prolonged and uncertain timeframe for the transaction to close,” says Beatrice Woo, a Moody’s VP/Senior Credit Officer.
The regulatory controversy surrounding Lone Star’s initial purchase of its KEB stake in October 2003 has made it difficult for Lone Star to sell their holdings.
“This issue has already scuttled Kookmin Bank’s (C/Aa3) proposed acquisition in 2006 of Lone Star’s stake in the bank, and there is no deadline for resolution,” says Woo. “Hence, the ability of HSBC Asia and Lone Star to conclude the transaction is unclear. Therefore, the rating agency will only take action – if warranted – when the deal conclusion is more definitive.”
Korea Exchange Bank was established in January 1967 by the government originally as a specialist foreign exchange bank. It retains its strength in trade finance and foreign exchange. In terms of assets, it holds KRW84.9 trillion (USD 91 billion) and ranks sixth largest among Korea’s nationwide commercial banks with 6% of system assets. It operated a branch network of 338 domestic and 26 overseas offices as of end-2007.
The following ratings are confirmed with a stable outlook:
Foreign currency senior debt of A2;Foreign currency subordinated debt of A3; andGlobal local currency deposit of A2.
The following ratings remain unaffected and carry a stable outlook:
Foreign currency long-term deposit of A2;Foreign currency short-term deposit of P-1; and
Bank financial strength of C-.