The Korea Deposit Insurance Corporation (KDIC) is expected to decide within the next few days how to proceed with sale of its 80.05% stake in the bank following the postponement of a $500 million GDR.
Similar to a prospective dollar bond for Kepco, the GDR has fallen foul of the Korean government's concerns about the increasing strength of the Won, which has risen 8.7% against the dollar since April. The decision to hold the deal back came right as roadshows were scheduled to begin under the lead of Credit Suisse First Boston, UBS Warburg, LG and Samsung Securities.
It now seems likely that the government will decide to sell a stake to domestic institutions and retail investors emulating the success of the recent sale of its remaining stake in KT Corp. Originally, the government had hoped to sell 15% of Cho Hung through a GDR, then 15% to 20% to a strategic investor and if this failed, 10% to 15% in a placement to domestic institutions. The remaining 40% to 45% was to be sold in stages from 2003.
And in some respects, observers say that it will be easier to resurrect the GDR once the strategic issue has been resolved. Two main problems for investors during pre-marketing were the overhang of the privatization programme and uncertainty about Cho Hung's position in the consolidating Korean banking sector. Investors also had issues with the bank's toppy share price, which closed yesterday (Tuesday) at Won6100, up 47.34% on the year.