Morgan Stanley acquires 75% stake in Ssangyong

Morgan Stanley Private Equity Asia is pushing ahead with an investment in Korea at a time when a number of heavyweight US GPs are under scrutiny from the Korean authorities.

Morgan Stanley’s Asia-Pacific private equity group, which is headquartered in Hong Kong, has agreed to acquire a 75 percent of Korea’s Ssangyong Corp, a trading company, from its creditors.

The firm will invest 67.8 billion Korean won ($72 million) of equity in addition to the assuming $120 million of Ssangyong debt, making the total transaction worth some $192 million, according to a Morgan Stanley spokesman.

Ssangyong is a Korean trading group which ran into financial difficulties in the late 1990s. The company has been recovering since 2002, thanks to help from financial institutions and the completion of a restructuring programme, according to Korean news agency Yonhap.  

Ssangyong creditors reached a memorandum of understanding on the deal with Morgan Stanley in September last year.

Morgan’s investment in Ssangyong is being funded from Morgan Stanley Private Equity Asia Fund, the firm’s first Asia-dedicated private equity vehicle which closed on $515 million in August last year.

Morgan Stanley’s engagement comes after the Korea authorities have adopted what appears to be a hostile stance towards foreign private equity investors operating in the country. 

In the most high-profile case thus far, Dallas-based Lone Star Funds is being investigated over its highly lucrative investment in Korea Exchange Bank. The US firm stands accused of having deliberately understated the bank’s financial situation in order to acquire it on favourable terms. Prosecutors are also investigating Shin Dong Hoon, a former vice president of Lone Star subsidiary Hudson Advisors Korea, and Woo Byeong Ik, head of KDB Partners, previously a joint venture between Lone Star and Korea Development Bank. Hudson and KDB Partners were involved in managing distressed debt that Lone Star had bought from government agencies. 

Separately from the Lone Star saga, charges of insider trading have recently been brought against Hwang Sung-Jin, the head of the Korean arm of Warburg Pincus, in relation to that firm’s investment in credit card firm LG Card. Hermes Investment Management, The Carlyle Group and Newbridge Capital are among other Western investment groups to have also been the subject of recent regulatory investigations in the country.  

Speaking at an industry gathering held by sister publication Private Equity International in Hong Kong last week, several delegates expressed concern over private equity-related developments in the country.