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| KEB Hana Bank CEO Ham Young-joo |
KEB Hana Bank is facing mounting risks to suffer a loss in its 362 billion won ($318.1 million) investment in a Chinese firm that is undergoing a liquidity crisis.
In 2015, KEB Hana invested 132 billion won in establishing a leasing company jointly with China Minsheng Investment Group. The lender owns a 25 percent stake in the leasing company.
In the following year, KEB Hana additionally invested 230 billion won in China Minsheng Investment Holdings, the group's overseas investment platform unit.
As it did with HNA Group and Anbang Insurance Group, the Chinese government stepped in to take over the group's control to keep it afloat. KEB Hana has reportedly financed the group in loans as well, raising concerns that risk exposure could be more than the 362 billion won.
KEB Hana Bank said, however, it is unlikely to suffer a loss since the Chinese government is actively engaging in the group's restructuring, but the gravity of the situation seemed to be overlooked by the lender considering the total of the Chinese firm's debt.
According to New York-based business news Bloomberg, China Minsheng Investment Group is struggling to repay its debt after embarking on a spending spree. Currently, the Shanghai-based conglomerate owes about $34 billion as of June last year, one of the biggest debt piles among China's private companies.
A majority of its bonds are scheduled to mature this year.
"A China Minsheng Investment default would arguably be the most serious in China in more than two decades," Australia & New Zealand Banking Group credit strategy head Owen Gallimore said.
KEB Hana Bank said it reported the case with the Financial Supervisory Service (FSS) about its possible loss.
"We are also closely monitoring the situation," an FSS official said.
"KEB Hana Bank reported that it is unlikely to suffer a loss since the Chinese government displays its strong determination to keep the group afloat. The group's creditors will announce its restructuring plan by the end of next month. We need to see how the matter develops by then."
The group's creditors, including the Export-Import Bank of China, China Construction Bank Corp. and the city of Shanghai, said they will announce a restructuring plan next month. The plan is expected to include a possible repayment delay and lowering interest rate.
