Baring PEA to refinance two Korean lenders to recoup investment

Hong Kong-based Baring Private Equity Asia is planning to raise a total of 674 billion won ($532 million) in loans for South Korea's Acuon Capital and Acuon Savings Bank to recoup most of its investment in the two small-sized lenders, according to investment banking sources on Monday.

The new loans will be used to repay their existing debt and pay dividends to their shareholder Baring PEA.

Baring PEA had acquired Acuon Capital and Acuon Savings Bank in August 2019 from the US private equity firm J.C. Flowers & Co. for a combined 700 billion won. It financed the purchase with 285 billion won in loans from Woori Bank.

Baring PEA commands a 93.98% stake in Acuon Capital, which in turn owns 100% of Acuon Savings Bank.

Korea Investment & Securities Co., Shinhan Investment Corp. and Woori Bank will arrange the new loans with an interest rate at the higher end of the 5% range.

The recapitalization comes on the back of their brisk asset and profit growth. Ultra-low interest rates over the past few years and regulatory meddlings in conventional banks over loan growth had led to borrowers switching to savings banks and credit loan specialists.

Acuon Capital, formerly known as KT Capital, deals with unsecured loans. Acuon Savings Bank, formerly HK Savings Bank, focuses on borrowers with low credit scores.

The enterprise value of both lenders has almost doubled to a combined 1.4 trillion won, or 1.25 times their net assets in aggregate, since Baring PE acquired them in 2019.

Consolidated assets at Acuon Capital had soared 83% to 9.2 trillion won in 2021, compared with two years earlier. Its net assets had grown by 47% over the same period. 

Acuon Capital posted its highest-ever revenue of 675.8 billion won in 2021, an 18.8% increase on-year. Operating profit surged by 40% to 174.6 billion won during the period.

Upon completion of their recapitalization, Baring PEA is expected to embark on its exit process as was the case with Logen Co., a mid-sized Korean parcel delivery firm. It sold Logen to a small-sized Korean company for about 340 billion won last year. 

Among its Korean portfolio companies, Baring PEA has yet to exit from Kyobo Life Insurance Co. in which it had invested for a decade.

The private equity firm is slated to be acquired by Sweden’s EQT for €6.8 billion ($7.2 billion).

(Updated on May 4 to correct the paragraph on Logen Co., from which Baring PEA exited in 2021.) 

Write to See-Eun Park and Jun-Ho Cha at seeker@hankyung.com
Yeonhee Kim edited this article.