Lone Star KEB deal – 5 years in prison and HSBC on hold

A South Korean court on Friday found Lone Star Funds’ local head guilty of stock price manipulation and sentenced him to five years’ in prison. HSBC has been trying to buy KEB from Lone Star, but that may present a problem right now. HSBC’s August agreement with Lone Star expires in April, though the Yonhap newswire quoted an unnamed HSBC source as saying it would be extended. HSBC officials in Seoul and Hong Kong declined comment.

Meanwhile, minority investors in Korea Exchange Bank’s card unit told local press that following the verdict they would sue Lone Star for losses they incurred due to the stock manipulation. The deal reminds us of HSBC’s last great deal under shady circumstances. HSBC bought predatory lender Household International as Household’s CEO William F. Aldinger told his employees, and the world, “we are not predatory lenders.” As the stock price plummeted Household was charged with predatory lending and paid a record $488 million fine. HSBC bought Household shortly thereafter and Aldinger profited nicely.

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