Creditor KDB to use equity fund to acquire Dongbu Special Steel

The state-run Korea Development Bank decided to take over Dongbu Special Steel and Dongbu Steel’s Dangjin Port, two debt-ridden special function affiliates of Dongbu Group, officials said Monday.

KDB and Dongbu Group on Friday agreed to establish a KDB-led private equity fund to acquire 100 percent of the two companies’ shares for 110 billion won ($106 million) and 150 billion won, respectively.

It is expected that the PEF will kick off in May and the purchasing process will round off in June, but all will depend on the total amount of investment capital raised, according to KDB officials.

The purchase agreement was a compromise after a long tug-of-war between KDB, the key creditor which had been pushing for a swift restructuring, and Dongbu Group, which was unwilling to sell off its profitable assets for the price offered.

In exchange for Dongbu’s agreement to the sales, KDB agreed to include an “earn out” clause in their deal, stating that Dongbu Group is entitled to any trading profit that KDB may make in the future by selling the acquired units to a third party.

Dongbu Special Steel specializes in the processing of steel rods and plates used for automobile parts.

(tellme@heraldcorp.com)