Camko Specialized Bank is attempting to sell a 100 per cent stake in the bank to comply with a South Korean court order to dilute the equity stake of its majority stakeholder, which filed for bankruptcy five years ago, bank officials said yesterday.
Camko, one of nine specialised banks in Cambodia, is half-owned by South Korea-based Busan Mutual Savings Bank, whose two affiliates – Busan and Busan 2 Savings Banks – filed for bankruptcy in 2011. South Korean courts have directed state-run deposit insurer Korea Deposit Insurance Corporation (KDIC) to sell Busan’s assets in Cambodia to recover the money paid as insurance.
The fire sale has Camko bank, with $12.6 million in assets, looking for a buyer, said Han Hyoung Gu, KDIC’s team leader for liquidation and asset recovery.
“We have paid a lot of money to protect depositors of Busan and Busan 2 Savings Banks,” he said. “We have to collect that money from the bankrupt estate [Busan] which has equity in this bank [Camko],” he said.
While Camko is only required to liquidate Busan’s 50 per cent share in the bank, the bank’s other stakeholders have agreed to sell their positions too, Han said.
Camko released a notice last week calling for bids on its full shareholding. The bank expects to announce a preferred bidder by March 14 and sign a sale agreement by March 31.
It is the fifth time KDIC, in its role as Busan’s bankruptcy trustee, has attempted to offload Camko bank since 2011, according to Han.
“We have tried four times before so it is not the first time for us,” he said. “The price is the [main] matter, and other than that we don’t have any other concerns [in sellingthe bank].”
Busan’s insolvency was part of a wave of bank collapses in South Korea that followed the 2007-2008 global financial crisis. KDIC is now tasked, Han explained, with diluting the investments of four bankrupt banks that indulged in risky real estate bets and together hold more than $1 billion in assets in Cambodia.
These banks include the two Busan banks, Prime Savings Bank and Tomato Savings Bank, which is the majority shareholder of Tomato Specialized Bank.
Unaudited financial results released by Camko Specialized Bank, show the bank’s non-performing loan rate reached 60 per cent last year, amounting to more than $4 million. Most of these loans were provided to around 300 customers who purchased residential units in Camko City, a satellite city being built on the outskirts of Phnom Penh by Korean developer World City and bankrolled by Busan Savings Bank.
Kim Tae Sup, president of Camko Specialized Bank, insisted his bank’s high level of non-performing loans would not deter potential buyers.
“The main focus on our assets will be on the bad loans,” he said. “If they [potential buyers] think they can collect some portion of these loans they will think positively.”
Kim added that the bank had frozen close to $4.7 million in assets used as collateral on bad loans, and would auction these assets if Cambodian courts approve.
“We have finished freezing all the property from borrowers with bad loans,” he said. “If the court rules in our favour, we will sell these properties in Camko City.”
The bank has had issues recovering money from their bad loans, Kim acknowledged, adding that these bad loans were a result of the global financial crisis in 2008, which caused property prices to “plummet” globally.
Stephen Higgins, managing partner at investment firm Mekong Strategic Partners, said Camko bank’s financials would influence its potential to find a good bid price.
“That said, everything has a price, I just don’t think it would be a very high one,” he said.
Keeping in mind this was the bank’s fifth attempt at a sale, Higgins said it was unclear who would bid for such an asset.
“Perhaps a vulture fund that is willing to buy the portfolio at a very significant discount and then run with the process of resolving the non-performing loans,” Higgins suggested.
He said it would be prudent for Cambodia to itself institute a deposit insurance scheme to protect local depositors from bank failures, with a scheme covering riel-denominated deposits being the best option.
“They should implement those things when times are good, rather than rapidly trying to implement one when things aren’t so good and you desperately need it,” he added.