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Lone Star Private Equity – The Deal Is Off

September 19, 2008

Lone Star’s Saga Back to Square One

1. FSC Chairman Jun Kwang-woo
2. Lone Star Chairman John Graykan
3. Kookmin Bank CEO Kang Chung-won
4. Hana Holdings CEO Kim Seung-yu


Wall Street Meltdown Cause for HSBC’s Withdrawal Before Deadline

Lone Star’s stalled effort to sell a controlling stake of Korea Exchange Bank (KEB), the fifth largest by assets, has come back to square one. HSBC Holdings, one of the world’s top British banks, has given up its bid to purchase the bank from Lone Star, a Dallas, Texas-based fund. But, this time, the cause of the broken deal was not so much the Korean government’s bureaucracy as the unfolding turmoil on Wall Street.

HSBC Asia Terminates $6.3B KEB Agreement, Citing Recent Market Turmoil

Seoul, South Korea (AHN) – HSBC Holdings PLC (NYSE: HBC), which got 26 percent of its 2007 revenue in North America, announced on Friday that HSBC Asia has terminated its agreement to purchase Korea Exchange Bank for $6.3 billion.

HSBC Holdings, which is the parent company of the HSBC Group, decided to abandoned its bid to own a controlling stake in South Korea’s seventh-largest bank by assets from the U.S.-based investment firm, Lone Star Funds

“We are disappointed that HSBC terminated the agreement and that the transaction will not be completed,” John Grayken, Chairman of Lone Star Funds, said in a statment.

HSBC and Lone Star Funds had entered in to an initial agreement, which ended in the month of July, to acquire 51.02 percent stake in Korea Exchange Bank.


The bank blamed the uncertain financial market for its decision not to purchase the share owned by Texas-based private equity firm Lone Star.

HSBC, which had announced the deal a year ago, said its plans to buy the stake were no longer in the best interests of its shareholders.

Analysts say it may use the money to buy a western bank hit by the current economic slowdown and HSBC has been linked already with Washington Mutual and the Royal Bank of Scotland.

HSBC Scraps KEB Purchase After Failing to Cut Price

HSBC Holdings Plc, Europe’s largest bank, abandoned the $6 billion purchase of Korea Exchange Bank after failing to persuade owner Lone Star Funds that the global credit crisis justified a price cut.

Korea Exchange Bank‘s shares had their biggest decline in more than four years after London-based HSBC said the plan to buy the fund’s 51 percent stake was no longer in shareholders’ interests. Regulators held the deal in limbo for a year, citing legal disputes involving Lone Star.

Financial Services Commission Chairman Jun Kwang Woo told reporters the talks failed as the two parties had “significant” differences over price. He declined to comment further.

Regulators had refused to approve the takeover until legal disputes surrounding Lone Star’s 2003 acquisition of Korea Exchange Bank were resolved. The criminal probe forced Kookmin Bank to cancel a purchase of Lone Star’s stake in November 2006.

Lone Star and its South Korea chief Paul Yoo on June 24 won appeals against their convictions for manipulating the stock price of a Korea Exchange Bank unit to buy the affiliate cheaply. In a related case, prosecutors also allege Lone Star’s purchase of the Korean bank was engineered at an artificially low price through a political conspiracy.

Lone Star chairman denies wrongdoing

John Grayken, the chairman of Dallas, Texas-based Lone Star Funds, is surrounded by media at the Seoul District Court Office in Seoul, South Korea, Friday, Jan. 11, 2008. Grayken was set to testify in a high-profile South Korean trial involving the U.S. buyout group as prosecutors said Thursday they plan to question him afterward. (AP Photo/Lee Jin-man)

SEOUL, South Korea — The chairman of Lone Star Funds, testifying Friday in a high-profile South Korean trial involving allegations the U.S. buyout group engaged in stock price manipulation, denied the fund did anything illegal.

John Grayken, the chairman of Dallas, Texas-based Lone Star, appeared at the Seoul Central District Court as a witness in the trial of Paul Yoo, the head of the fund’s South Korea operations, at the request of Yoo’s defense team.

Lone Star’s attempts to sell its controlling stake in Korea Exchange Bank, which it acquired in 2003, has been hampered by Yoo’s case as well as other legal and tax issues involving the fund.

The world of wheeling and dealing, Texas style, has taken a hit.  Lone Star Equity is not a household word, but it is a major player in multi-national investment.Texas financial wheeler dealers specialize in purchasing distressed companies and grabbing leveraged buy-outs. It also purchases underperforming and non-performing loans from world banks. Their fingerprints are all over the world, they have been accused of tax evasion and failing to report assets.  They are now exposed because of the global economy meltdown. The tip of a huge iceburg, Dallas based Lone Star is the loose string on a woven sweater that when pulled, will expose the bare naked truth about our over speculated economy.

These unregulated speculators take our money and gamble with the world.  They have made money for themselves and lost money for others, they are expert salesmen.  They are the epitome of PONZI. The fallout is overwhelming, because, their investors are willing to trust someone else to make their investments grow.  Americans, in general, are not educated about money or economics. Most people will change channels when business news comes on the TV.  The federal education system has unwittingly created a population of dependents. We depend on someone else to know what is going on and have no way to question their integrity.  Hopefully this was an educational oversight and not just another conspiracy, there are so many conspiracies to choose from… The house of speculation is falling hard right now.  The federal government is scrambling to catch it before it splatters.  You and I are the victims.  We did not pay close enough attention to something we did not understand.

Watch and learn from all this.  The hidden manipulators are being exposed daily.  Take pictures and remember their names.

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