Korean institutions partake in US fund’s buyout deal as financial investors: report

NH Investment & Securities Co. Ltd. and a federation of credit cooperative in South Korea have extended about 50 billion won ($44 million) of loans to finance a US private equity firm’s cross-border acquisition, in a rare case of South Korean institutions participating in an overseas buyout deal as financial investors, according to a newspaper report.

The loans provided by NH Investment and the Korean Federation of Community Credit Cooperatives were part of the 110 billion won that OpenGate Capital raised to fund its 2016 acquisition of Belgium-based Umicore Zinc Chemicals, currently EverZinc, said the Maeil Business Newspaper on March 17, citing investment banking sources.

OpenGate Capital invested about 90 billion won to secure an equity interest in the producer of specialty zinc chemicals, in a transaction reportedly worth $160 million.

While the federation of credit cooperatives lent 40 billion won, NH Investment made loans of 10 billion won in its principal investment with no intention of selling them down to other investors. They were granted a tag-along option to redeem the loans.

The debt financing, arranged by Deutsche Bank, is expected to deliver an annual return of over 7% for the five-year investment period. In comparison, domestic M&A funding generates a return of 3 to 4% per annum.

“With competition in the domestic market intensifying further, the global M&A financing market is expected to gain the spotlight as a niche investment market for local institutions,” the daily quoted an unnamed source with knowledge of the loan financing as saying.

Maeil added that the two South Korean institutions were given the opportunity of participating in the buyout funding because of the federation of credit cooperatives’ relationships built with the European bank through overseas real estate investments over the past few years.