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The offshore investment firm Lone Star on Wednesday rebuffed a damning report on its takeover of Korea Exchange Bank by the Board of Audit and Inspection, calling it ¡°impossible to accept.¡± The BAI this week published its findings saying Lone Star¡¯s 2003 takeover of KEB at a knockdown price was ¡°flawed¡± and ¡°illegal¡± due to massive manipulations by the bank and finance officials. In a press release Wednesday, Lone Star chairman John Grayken rejected the results of the BAI probe that Korean government officials and a former KEB president conspired to make the bank's financial troubles look worse than they really were to finagle the sale to a bidder who would not otherwise have qualified.
Grayken said the bank¡¯s BIS ratio, which represents its financial soundness, ¡°was not too low, it was actually too high. We know this because the loan loss provisions that were actually required¡± would have lowered the ratio below the level projected before the purchase. According to him, the purchase was thus an expensive deal, considering that the firm set aside an extra W1.4 trillion (US$1=946) in allowance for bad debts after the takeover. ¡°Ironically even if (we accept) the BAI's allegation that the BIS ratio was lowered as a result of a conspiracy and that approval of the sale of KEB to Lone Star was therefore inappropriate, the Financial Supervisory Commission's remedy would be to order Lone Star to sell its stake in KEB to below 10 percent, and this is exactly what Lone Star has stated it intends to do and has been prevented from doing because of the ongoing controversy.¡±
Lone Star stood to make trillions from the sale tax-free until a welter of investigations including a pending criminal probe threw a spanner in the works.
(englishnews@chosun.com )
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