A consortium led by chemical-to-financial conglomerate KG Group has become the preferred bidder to buy Dongbu Steel, a sign that the debt-ridden steelmaker will end its loan workout on schedule after five years, according to a disclosure issued April 4.
Courtesy of Dongbu Steel
Steelmakers shun bid for debt-saddled Dongbu Steel
“For Dongbu Steel’s third-party allocation of shares for capital increase and ownership transfer, the KG-led consortium has been selected as the most preferred bidder,” Dongbu Steel said in the disclosure. “Further details will be disclosed as soon as they materialize.”
The bidding was managed by the Korea Development Bank and Credit Suisse First Boston’s Seoul branch. Up for sale was a 50 percent-plus stake in the steelmaker, including newly issued stocks. Their valuation is underway.
Currently, debtholders comprising KDB, NongHyup Bank, the Export-Import Bank of Korea, KEB Hana Bank and Shinhan Bank own a combined 85 percent of Dongbu Steel as of end-2018. Its market cap without a paid-in capital increase came to around 272.3 billion won ($239.66 million) as of the April 4 session’s close. The creditors in 2014 took control of the company from Dongbu Group, now known as DB Group.
Dongbu Steel underwent a loan workout in 2015, and the workout is set to expire in 2020. Selloff attempts by creditors have failed twice, in 2014 and in 2017.
According to its financial statement for 2018, Dongbu Steel’s debt-equity ratio reached 4,120 percent, 2.5 times the corresponding figure for 2017, while its operating loss came to 65.6 billion won, up sixfold on-year.
KG Group has formed a consortium with Cactus Private Equity. Founded in July 2018, the private equity firm is led by Hans Jung, formerly a senior managing partner at private equity STIC Investment with a good track record, having normalized Farm Hannong until LG Corp. acquired the company.
KG Group consortium has selected advisers for the acquisition, including law firm Bae, Kim & Lee and accounting firm Ernst & Young Han Young.
By Son Ji-hyoung (firstname.lastname@example.org)