Korea Development Bank Investment (KDBI) is accelerating its efforts to gain a foothold in the restructuring market, despite growing concerns that the company may have an unfair advantage because it is a subsidiary of a state-run enterprise.
Sources said KDBI and Keistone Partners made a preliminary offer on Monday (October 26) for a 83.45% stake in South Korean company Hanjin Heavy Industries & Construction (HHIC), which has been in a restructuring process controlled by creditors since last year.
KDBI also joined the bidding race recently for a controlling stake in Doosan Infracore, a machinery manufacturer being offloaded by cash-strapped Doosan Group as part of its restructuring plan.
There are concerns that KDBI may have an unfair advantage in the deals, as it is a subsidiary of Korea Development Bank (KDB), the main creditor of both HHIC and Doosan Group. The investment firm could have more access to information related to the deals than rival bidders, some industry watchers said.
“KDBI’s interest in companies whose main creditor is KDB may discourage other bidders from competing,” said an official at one private equity firm in Seoul. “This could also work to the advantage of KDBI.”
KDBI participated in the bidding process for HHIC despite the criticism because it wants to build a track record in the restructuring market, industry watchers said. Founded in April 2019, KDBI has only one portfolio company, Daewoo Engineering & Construction, which it acquired from KDB in July 2019.
HHIC’s construction business is in better shape than it was a few years ago, with profits continuing to rise. In addition, the company’s land in Yeongdo-gu – where its shipyard is located – will be redeveloped by Busan Metropolitan City to include residential and commercial complexes in the next 10 years, which could lead to a higher return on the investment.
“Almost all potential buyers for HHIC have a keen interest in the potential redevelopment of the Yeongdo site as a way to boost returns and KDBI is not an exception,” an industry insider said. “KDBI’s strong interest in HHIC is understandable.” (Reporting by Ik-hwan Choi)