Sample Stories for Troubled Company Reporter - Asia Pacific

KOREA EXCHANGE : DBS Group Ends Talks for Planned Acquisition

Troubled Company Reporter, June 15, 2007

DBS Group Holdings had ended talks with Lone Star Funds relating to DBS'
planned purchase of the fund's US$6.5 billion worth of controlling stake
in Korea Exchange Bank, Business Times reports.

According to the report, DBS hinted that this was due to the current legal issues that Lone Star is facing.  The Times recounts that Lone Star, which owns 64.62% of KEB, is facing a legal battle in South Korea over its 2003 purchase of the bank.

The Seoul court is investigating if Lone Star conspired with local
officials to drive down the price of KEB when it was sold in 2003 and
whether Lone Star officials and others manipulated the share price of
KEB's separate credit card unit for cheap acquisition, XFN-ASIA explains.

XFN-ASIA notes that Lone Star has denied any wrongdoing and claimed the
cases against it are driven by latent hostility to foreign investors.

These legal issues, Business Times notes, have delayed the sale of the bank.

In November, Lone Star said it had to withdraw from a US$7.4-billion deal to sell KEB to Kookmin Bank, after judges granted prosecutors arrest warrants for two US-based Lone Star executives, Agence
France Press recounts.

The Press says that the State auditors have also accused former KEB chief Lee Kang-Won of helping Lone Star acquire the bank cheaply by inflating its debt figure.

John Grayken, Lone Star chairman, said in translated Korean that DBS had
approached Lone Star after talks for the sale of KEB to Kookmin Bank were terminated in November.   DBS had also worked to form a consortium with South Korean bank Nonghyup for the buy-out, Reuters News reports.

According to Reuters, several other investors had asked for negotiations
to buy KEB but little progress has been made.

Analysts said that DBS's decision is unlikely to encourage more potential bidders to come forward since buyers will find the situation very complicated, The Times points out.

                 About Korea Exchange Bank

Korea Exchange Bank -- -- established in 1967, is one of seven national banks in South Korea with over 300 domestic branches and 28 overseas networks constituting the most extensive global banking network of any Korean bank.  KEB Futures -- -- is a clearing member of KOFEX and is a subsidiary of Korea Exchange Bank, the official F/X settlement bank for Korean Futures Exchange.

                        *     *     *

The Troubled Company Reporter - Asia Pacific reported on May 8, 2007, that as part of the application of its refined joint default analysis and updated bank financial strength rating methodologies, Moody's Investors Service upgraded these ratings of Korea Exchange Bank:

      * BFSR is changed to C- from D

      * Foreign Currency Long Term Deposit Rating is changed to
        A3 from Baa2

      * Foreign Currency Debt Rating for senior obligations is
        changed to A2 from Baa2 and for subordinated obligations
        to A3 from Baa3

      * Foreign Currency Short Term Debt Rating is changed to
        Prime-1 from Prime-2

KEB's Foreign Currency Short Term Deposit Rating is unchanged at Prime-2.  All the ratings have a stable outlook except for the Foreign Currency Deposit Ratings, which carry a positive outlook.  These actions also concluded a review for possible upgrade on the foreign currency long-term ratings and BFSR initiated on November 29, 2006.

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