The Korean government signed an MOU with Newbridge Capital, a major U.S. investment firm, on December 31, 1998 at 2 p.m. The MOU sets out general terms of the sale of the nationalized Korea First Bank. Subsequent to a due diligence on Korea First Bank, a purchase agreement is expected to be signed and the acquisition by the Newbridge Capital led consortium is expected to be finalized in April or May of 1999.
Newbridge Capital is in partnership with many worldwide financial institutions and is seen as a perfect match for the government and in turn Korea First Bank toward pursuing the ultimate task of promptly resuming operations at the bank. On the other hand, the government will diligently fulfill its role toward inducing a smooth transition of management and for that will be in close contact with Newbridge Capital and other participating institutions. With the sale of Korea First Bank finalized the government will exert its utmost effort to pursue the sale of the remaining bank, Seoul Bank to foreign financial institutions by the end of January, 1999.
MOU terms
- Bad assets and a portion of liabilities of the bank will be separated out and transferred to a bad bank
- Newbridge consortium will take a 51% stake, whereas the government will take a 49% stake of the bank
- The government will share in the upside potential of the bank by taking a 49% stake of the bank and through warrants worth 11% of government stake as premium
- The cost involved for Newbridge consortium will be equivalent to 51% of the net asset value needed to bring the BIS ratio of the bank up to a to-be-determined level
- Newbridge consortium will be prohibited from selling its stake of the bank without permission of the government for a period of 2 years
- A put-back option will be available for new NPLs that surface during the first year and up to a certain amount for the second year
- As a way to guarantee autonomy of bank management, the government will delegate voting rights to the Newbridge consortium, provided that it does not sell all (or close to all) of its stake, file for bankruptcy, issue new shares, reduce capital, or act against government's interest
* Please refer to the attached file for details.