KDB turnaround fund makes maiden investment

A turnaround fund launched by Korea Development Bank earlier in the year has acquired sewing machine maker Sunstar Precision for W40bn.

State-owned lender Korea Development Bank (KDB) has acquired an 80 percent stake in Sunstar Precision, a sewing machine manufacturer, for W40 billion ($32 million; €23 million).

The investment was made out of a turnaround fund the lender launched earlier in the year. The fund, targeting commitments of W1 trillion, has garnered W100 billion thus far, a spokesman said.

Sunstar Precision has struggled of late due to losses on currency contracts, according to the bank’s website. The investment was made through the acquisition of existing and new shares of Sunstar Precision.

The bank plans to merge the troubled firm with Sunstar Precision’s affiliate Sunstar Machinery, according to KDB’s website. “KDB plans to transform Sunstar into a financially healthy and solid company through intense restructuring and shoring up cash conditions,” the KDB said.

The turnaround fund launched by KDB seeks to acquire companies that have growth potential but have been hit by financial problems. Its mandate is to invest capital in distressed small- and medium-sized enterprises in exchange for a controlling stake in them. The fund will hold stakes in these companies for two to three years attempting to turn them around and then sell them back either to previous owners or to members of the existing management.

Last week, KDB signed an agreement with the Abu Dhabi Investment Company and Korea Trade Promotion Agency to increase the flow of investment between South Korea and the Middle East and North Africa. The agreement encompasses private equity, cross-border M&A and infrastructure.

In May, it formed an investment agreement with global buyout firm Kohlberg Kravis Roberts to help advance the local private equity market.

Formed in 1954, KDB often acquires stakes in domestic companies with liquidity problems in an attempt to restructure them and sell them later.