KDB Sets up New Affiliate Korea Investment
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KDB Sets up New Affiliate Korea Investment
New affiliate to take charge of restructuring firms under KDB management and sell them for management fees; Daewoo E&C is first firm to take over

25(Sun), Aug, 2019

CEO Lee Dae-hyun of Korea Investment, a new affiliate of Korea Development Bank, explains KDB plan to sell Daewoo E&C under KDB management at the KDB IR Center in Seoul on July 17. (Photo: KDB)

Korea Development Bank (KDB) announced on April 25 that it would set up KDB Investment as its subsidiary to be in charge of investee management and industrial restructuring. The initial capital of the subsidiary is 70 billion won and its first CEO is Lee Dae-hyun, KDB’s former senior vice president.

The purpose of KDB Investment is to acquire investee shares from KDB, carry out restructuring, and sell the restructured companies without delay so KDB investees can be efficiently managed and restructured.

The former senior vice president has supervised the establishment of the subsidiary since the start of the process, and KDB appointed him as the first CEO so that the subsidiary can be stabilized early and assets can be transferred promptly.

The number of employees is scheduled to increase from 12 to about 25.

The subsidiary is going to recruit experts specializing in private equity management, financial consulting, restructuring and M&As. A couple of companies are likely to be managed by the subsidiary in place of KDB this year.

 KDB explained that the subsidiary can make independent decisions as KDB cannot intervene in its investment activities according to the Financial Investment Services and Capital Markets Act.

The new subsidiary will take over the business firms that KDB had to take over during their restructuring and boost their corporate values before turning them over in the form of public bidding.

Daewoo E&C is market valued at 1.9 trillion won and Korea Investment had to pay 1.360,6 trillion won for a 50.75 percent stake, or 6,450.60 won per share.

KDB will pay its new affiliate, GP, the fees for its handling of the business firms under its management as LP.

The amount has yet to be clarified, but the market shows that the annual fee would be around 1-2 percent of total value of the assets under management.

The annual fee that KDB would have to pay Korea Investment would be around 1.3 billion won or 1.5 percent of 860.6 billion won that Korea Investment invested in Daewoo E&C.

Whether the fee would be appropriate or not depends on how well Korea Investment would manage the construction firm by appointing qualified experts to run the company, including such areas as the defaulted assets that are under management and restructuring to boost the market value of the construction firm.

Korea Development Bank (KDB) raised 400 billion won ($337.7 million) in two-year sustainability bond to commit to environmental and social projects.

The debt issued at a coupon of 1.79 percent must finance environmental and social projects in accordance with global guidelines, the bank said recently.

The debt offering was co-led by KTB Investment & Securities, Hana Financial Investment, Kyobo Securities, and KB Securities.

KDB’s one-year existing bond yields at 1.817 percent, and benchmark three-year government bond at 1.716 percent.

So far, KDB has raised total 1 trillion won from sustainability bonds.

The state lender issued 300 billion won in the country’s first Korean won-denominated green bond designed for environmental benefits and another 300 billion won in social impact bond last year.

The bank said it has set up an internal management body that meets the International Capital Market Association’s guideline on sustainability bonds and had it reviewed by external auditor Samjong KPMG prior to issuing the debt.

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