Korea Development Bank, WCP CB Sale 'Double Contract(?)'... Litigation Battle Looming

[Image source=Yonhap News]

[Asia Economy Reporter Lim Jeong-su] KDB Industrial Bank is facing a potential dispute over an alleged 'double contract' in the process of selling convertible bonds (CB) of the secondary battery separator company Double U C P (WCP). After KDB Industrial Bank signed a CB sales contract with the Ebest New Technology Business Finance (New Biz Finance) consortium and received a deposit, WCP exercised its CB preemptive purchase rights through Kiwoom Capital, putting the contract with the consortium at risk of cancellation.

Limited partners (LPs) who invested in the New Biz Finance consortium are claiming this is a clear double contract and are prepared to take legal action. If the dispute is not resolved promptly, it is expected to have a significant negative impact on WCP’s planned initial public offering (IPO).

According to the investment banking (IB) industry on the 29th, KDB Industrial Bank recently requested the 'Ebest-BEV New Technology Consortium' to withdraw the WCP CB sales contract. Ebest Securities’ New Biz Finance consortium had gathered about 50 LPs, including individual and corporate investors, and signed a contract in early July to acquire WCP CBs held by KDB Industrial Bank for approximately 80 billion KRW. The consortium paid the deposit to KDB Industrial Bank simultaneously with the sales contract. According to the contract, the final payment and deal closing were scheduled for that day.

The reason KDB Industrial Bank abruptly canceled the contract before deal closing was the exercise of the preemptive purchase rights on the CBs. WCP holds the preemptive purchase rights. Although WCP initially had no intention to exercise these rights itself, it designated Kiwoom Capital as an agent to exercise the preemptive purchase rights and expressed its intention to buy the CBs that were to be sold to the consortium.

The core issue of the controversy is whether a third party can exercise the preemptive purchase rights as an agent. The consortium argues that KDB Industrial Bank should have confirmed whether the preemptive purchase rights would be exercised before proceeding with the CB sales contract, and by failing to fulfill this seller obligation, a double contract was effectively created. Furthermore, although the original contract between KDB Industrial Bank and the consortium mentioned the possibility of exercising preemptive purchase rights, it did not explicitly state that a third party could be designated to exercise these rights on behalf of WCP.

An LP representative from the consortium also raised suspicions that the designation of a third party to exercise the preemptive purchase rights might be a result of favoritism among former KDB Industrial Bank financial professionals. Currently, No & Partners, founded by former KDB Industrial Bank PE office head Noh Gwang-geun, is selling its 32% stake in WCP, which was converted from CBs into shares. When KDB Industrial Bank, which had also invested, decided to sell the CBs, No & Partners allegedly induced WCP to designate Kiwoom Capital, led by former KDB Industrial Bank executive Choi Chang-min, as the agent to exercise the preemptive purchase rights.

The LP representative said, "KDB Industrial Bank valued WCP at 1.4 trillion KRW when signing the sales contract, but No & Partners is trying to sell its 32% stake at a valuation around 2.5 trillion KRW. If Kiwoom Capital buys at a low price and then sells the shares together with No & Partners, a significant profit will be realized."

The consortium has expressed its willingness to pursue legal action regarding this matter. They have already begun legal review through Ebest Investment & Securities, the general partner (GP). An LP representative pointed out, "According to the contract, this is a clear double contract caused by KDB Industrial Bank’s negligence."

In response, KDB Industrial Bank reportedly argues that the preemptive purchase rights specified in the original contract include the concept of designating a third party to exercise those rights. They also claim that there is no procedural problem since the CB sale must be pursued for the counterparty to know whether to exercise the preemptive purchase rights at the given corporate valuation. A KDB Industrial Bank official stated, "Whether to exercise the preemptive purchase rights is WCP’s decision and is not directly related to KDB Industrial Bank."

The legal dispute between KDB Industrial Bank and the consortium is expected to negatively affect WCP’s IPO, targeted for the first half of next year. Since the dispute over the approximately 5% stake remains unresolved, there is significant uncertainty, making it difficult for WCP to pass the preliminary listing review by the Korea Exchange (KRX). Currently, KB Securities and Shinhan Financial Investment are managing the listing. An IB industry insider said, "For the listing process to proceed smoothly, resolving uncertainties related to shareholdings must be a prerequisite."

This content was produced with the assistance of AI translation services.