Korea Corporate Governance Improvement (KCGI), a home-grown activist private equity fund which is seeking control of Hanjin Group, is planning to raise funds from foreign investors. It has taken out more loans against its Hanjin KAL shares and is attracting foreign investors to set up additional funds. Accordingly, the dispute between Hanjin Group and KCGI, which seemed to end after Delta Air Lines came forward as a white knight for Hanjin, is expected to flare up once again.
KCGI has recently been in talks with several foreign investors about loans collateralized with shares, according to investment banking (IB) industry sources on July 18. It is seeking to secure sufficient capital to prepare for a struggle to take a controlling stake in Hanjin KAL, the holding company of Hanjin Group.
An investment banking analyst said, “I heard that KCGI CEO Kang Sung-boo held sessions in Hong Kong in person to raise funds. Large institutional investors attended them and investors’ reaction was not bad.” It is not yet confirmed whether KCGI has succeeded in persuading foreign investors and raised capital. In this regard, a KCGI official said, “We are studying various plans to roll over the loans we have taken out.”
KCGI borrowed 20 billion won (US$16.97 million) from Mirae Asset Daewoo against a 1.79 percent stake in Hanjin KAL in March and borrowed an additional 20 billion won (US$16.97 million) in security for a 1.27 percent stake in April. However, Mirae Asset refused to extend the term of the existing loans and demanded KCGI repay the loans in two months after granting loans. Market experts said that Mirae Asset may have reversed its strategy in order to avoid an aggravation of its relations with Hanjin Group.
As a result, KCGI borrowed 30 billion won (US$25.46 million) from KTB Investment & Securities and The-K Savings Bank and repaid its loans from Mirae Asset at the end of last month. It is also planning to receive an additional loan from a savings bank to pay off the loans that are to mature at the end of this month.
If KCGI succeeds in raising capital from overseas investors, the battle for control of Hanjin Group will take on a new aspect. In particular, the price of Hanjin KAL shares will go up again when Hanjin Group and KCGI compete to expand their stakes again.