South Korean private equity funds that together acquired stakes in Doosan Infracore China Co. (DICC) have failed to reach an agreement with a creditor group to roll over their debt obligations, casting a cloud over the local PEF and acquisition financing markets, as well as Doosan Group.

According to the investment banking (IB) industry Tuesday, a group of Korean PEFs including Mirae Asset PE, IMM PE and Hana Financial Investment PE, which borrowed loans totaling around 130 billion won ($113.7 million) in 2011 from local financial institutions to acquire a 20 percent stake in DICC, could not reach an agreement with the creditor group to extend the loan due Wednesday.

The local PEFs took the loans from the creditor group led by the state-run Korea Development Bank, the National Pension Service and KEB Hana Bank to buy the stakes in the Doosan Group’s Chinese subsidiary for 380 billion won in 2011, with a plan to repay the debts through an initial public offering (IPO) of the unit in China or sale of their stakes to a third party. But the IPO was canceled amid the country’s prolonged economic slowdown while the investors could not find a buyer for their stakes.

The PEFs that have been in talks with the creditor group failed to obtain full consent of the creditors, which is required to roll over the debt, as the creditors remained worried that the investors would not be able to repay the debt even after debt extension. After the talks to roll over the debt fell through, the creditor group could take over the 20 percent stake in DICC, which was set as collateral.

However, the creditors will likely wait until the result of the lawsuit that the PEFs filed against DICC’s largest shareholder Doosan Infracore Co. in November, accusing Doosan Infracore of remaining hesitant to cooperate on stake sale and demanding it to pay the principal and a 15 percent interest.

The investors have been claiming that winning the suit would enable them to pay back to the creditors who are waiting for the first ruling expected to come out sometime during this year, according to an unnamed official in the creditor group.

By Kim Hyo-hye

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]