Hanvit Bank Reverses Decision, Proceeds with $1bn Overseas Rights Issue

Strategic Insights -

Hanvit Bank, South Korea's largest bank, has decided to proceed with its $1bn overseas rights issue, reversing a recent decision to postpone it due to Daewoo group's financial difficulties. The bank, which has loaned Daewoo Won4,000bn ($2.05bn) and holds Won1,225bn in Daewoo bonds and corporate paper, claims a delay could erode investor confidence. The issue will be led by Lehman Brothers, and the funds will be used to strengthen Hanvit's capital base. This decision comes despite Hanvit's own financial struggles, including a potential "significant loss in 1999" due to stricter provisioning requirements and a loss of nearly $2.8bn on a pro forma basis last year.

Key Takeaways:

  • Hanvit Bank has decided to proceed with its $1bn overseas rights issue, reversing a recent decision to postpone it due to Daewoo group's financial difficulties.
  • The bank has loaned Daewoo Won4,000bn ($2.05bn) and holds Won1,225bn in Daewoo bonds and corporate paper.
  • Hanvit believes a delay in the issue could erode investor confidence, and the funds will be used to strengthen its capital base.
  • The issue will be led by Lehman Brothers.
  • Hanvit originally planned to raise $1.5bn through the issue, but lowered the figure after Daewoo's problems emerged two weeks ago.
  • The bank faces potential "significant loss in 1999" due to stricter provisioning requirements and a loss of nearly $2.8bn on a pro forma basis last year.
  • Hanvit's decision may affect plans by Korea Exchange Bank and Cho Hung Bank, two other nationalized banks, for GDR issues of $1bn each this year.