Lone Star Awarded $216.5 Million In Dispute With South Korea
Date
8/31/2022 2:51:55 PM
(MENAFN- The Peninsula) Bloomberg
South Korea was ordered to pay Lone Star Funds $216.5 million plus interest following a decade-long dispute over the US private equity firm's sale of Korea Exchange Bank.
The International Centre for Settlement of investment Disputes, a World bank arbitration tribunal known as ICSID, delivered the ruling to the South Korean government. Arbitrators only accepted about 4.6% of Lone Star's $4.68 billion in claims, Seoul's Justice Ministry said in an emailed statement on Wednesday.
The government finds the ruling regrettable and will seek measures such as an annulment or a stay of enforcement, the ministry said in a separate statement.
A spokesperson for Lone Star said while it was pleased the tribunal vindicated its claim, it was disappointed in the award's amount.
The figure 'fails to fully compensate Lone Star and its investors for losses resulting from the Korean government's wrongful conduct or for the risks Lone Star took in rescuing KEB in 2003, and the value it added for the benefit of all of KEB's shareholders and the Korean banking system,” the spokesperson said in a statement.
Lone Star Funds initiated the arbitration in 2012, claiming it suffered losses because the financial regulator used discriminatory measures to delay the sale of its stake in Korea Exchange Bank and the tax office imposed 'contradictory” taxation.
South Korea argued that its administrative steps regarded Lone Star fairly based on the principle of equal treatment for domestic and foreign citizens according to international laws.
Lone Star bought a controlling stake in Korea Exchange Bank in 2003 following the 1997-98 Asian financial crisis that led South Korea to accept a $57 billion bailout from the International Monetary Fund. The buyout firm planned to sell the stake to HSBC Holdings Plc in 2007 but the UK bank dropped its $6.3 billion bid in 2008 after South Korean authorities left the proposed transaction in limbo because of legal disputes.
The stake was eventually sold to South Korea's Hana Financial Group Inc. for 3.9 trillion won ($2.9 billion) in 2012 after price-cut negotiations during the fund's legal tussle. Before the sale, Lone Star, founded by John Grayken to buy distressed assets, recouped 2.9 trillion won in pretax profit on its 2.15 trillion won investment in the bank, through dividends and share sales, Korea Exchange Bank data showed at the time.
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