A stock purchase agreement for Hanjin Heavy Industries & Construction is now unlikely to be signed until the end of February, as Philippine financial institutions have not yet decided whether they will be selling their shares.

The preferred bidder, a consortium of Dongbu Corp, NH Investment & Securities Private Equity (PE) and Opus PE, has already set its deal structure and started preparing an agreement. The consortium plans to use a co-investment fund and spend dry powder from an existing fund instead of using acquisition finance.

The stock purchase agreement was initially expected to be signed at the end of January, but has been delayed because Philippine financial institutions have not decided if they will be exercising their tag-along rights. A scheduled meeting couldn’t be held in Manila due to the Covid-19 pandemic.

Philippine firms, including Bank of Philippine Islands, Rizal Commercial Banking Corporation, Banco De Oro Unibank and Land Bank, own 20.01% of the shipbuilder.

Some of the institutions reportedly said in a video conference with Korean creditors that they want to exercise their tag-along rights, but others are undecided. The consortium’s planned acquisition and exercise of management rights won’t be affected by the Philippines stakes.

“Philippine banks will see this as the right timing to collect debts because the shipbuilder is set to be sold at a higher-than-expected price,” said an industry source, adding, “Even if Philippine banks decide not to sell their stake along with domestic creditors, there is no problem at all in acquiring a controlling stake.”

The Philippine banks are expected to make their decisions in mid-February. The final deal structure is likely to depend on their possible exercising of tag-along rights.

Industry observers believe the stock purchase agreement will be signed at the end of February at the latest, followed by a fundraising process for the co-investment fund. (Reporting by Ik-hwan Choi)