KB Financial announces $777 million rights issue

KB Financial Group, the owner of Korea's Kookmin Bank, late Friday said it plans to raise approximately W1 trillion ($777 million) from an earlier announced rights issue. The renounceable offering will be open to investors who hold KB Financial shares on July 27 and the final offering price will be calculated on August 21.

The size of the offering is only half of the W2 trillion that the company had earlier indicated that it wanted to raise, based on information provided by investment banks that pitched for the mandate. KB Financial, which is still commonly referred to as Kookmin, didn't comment on the reduction in Friday's statement, but Bloomberg on Friday quoted KB Financial spokesman Choi In Seok saying that the company had chosen to raise less than initially planned as its capital base is stronger than expected.

However, some analysts argued over the weekend that the smaller fundraising will make it more difficult for Kookmin to make a major acquisition, such as the potential takeover of Lone Star's remaining stake in Korea Exchange Bank.

The announcement came little more than a week after Kookmin replaced all of the four international banks initially mandated for the rights issue and brought in Goldman Sachs and Morgan Stanley to arrange the deal instead. According to sources, Bank of America-Merrill Lynch, Citi, Credit Suisse and J.P. Morgan lost their mandates because of a disagreement over fees, although it is unclear what actually transpired before their dismissal since there were numerous versions of what had and had not been agreed between the issuer and the international investment banks before they were mandated.  

Domestic banks Samsung Securities and Korea Investment and Securities are also helping to arrange the deal and were not affected by the replacement of the international banks. The four bookrunners will underwrite the deal in full.

Kookmin said it will offer 30 million new shares, or 8.4% of the company's outstanding share capital, on the basis of 0.07768392 rights shares for every one existing share. Investors can choose to buy either ordinary shares or American depositary shares listed in the US. As with other Korean rights issues, the final price will be based on the lowest of two reference prices that will be determined on July 22 and August 21 and will either be based on a mathematical calculation involving the volume-weighted average price over a period just before those two dates, or equal to the latest closing price.

The rights shares will be priced at a 25% discount to the reference price. When the KB Financial board approved the rights issue on Friday, it referred to a rights issue price of W32,800 per share, which implies a discount of 30% versus Friday's closing price of W46,950.

Of the total deal, 20% will be set aside for company employees, while the remaining 80% will be allocated to institutional investors. The treasury shares that are held by wholly owned subsidiary Kookmin Bank, and which represents 13.9% of the share capital, will not be eligible to participate in the offering.

The subscription period for the ADSs will run from August 7-21, while the subscription for Korea-listed shares will be open on August 26-27. Existing shareholders who do not wish to participate in the offering can sell their nil-paid rights on the Korean stock exchange between August 10 and 17.

KB Financial said the offering will strengthen its pro-forma consolidated tier-1 capital ratio to 9.12% from 8.6% and its ratio per the Bank for International Settlement guidelines to 12.66% from 12.14%.

Separately, Singapore-listed container shipping company Neptune Orient Lines said on Friday that its S$1.437 billion ($996 million) rights offering was oversubscribed when it closed on Wednesday last week. The three-for-four offering was priced at S$1.30 per share, which equalled a 9.2% discount to the theoretical ex-rights price (Terp) and a 15% discount to the S$1.53 closing price on May 29, just before the announcement of the rights issue. The stock held up well during the offering period and closed at S$1.41 on Friday.

Neptune's offering was arranged by DBS, HSBC, J.P. Morgan and Morgan Stanley and fully underwritten by Temasek, which owns 67.4% of the company.