KDIC puts Tomato Bank on the chopping block
TOMATO Specialized Bank, the smallest bank in the Kingdom, is attempting to sell a majority stake in its operations in order to dilute the equity stake of its defunct majority shareholder while securing a partner able to help it meet the central bank’s revised minimum capital requirements, bank executives said yesterday.
The bank, one of 13 special- ised banks in Cambodia, operates a single branch in Phnom Penh with $9.7 million in assets as of the end of 2015.
Its majority shareholder, South Korea’s Tomato Savings Bank, filed for bankruptcy in 2011 following a string of bank collapses spurred by investments into speculative real estate. Following the demise of Tomato Savings Bank, South Korean courts ordered staterun Korea Deposit Insurance Corporation (KDIC) to manage and liquidate the bank’s assets in order to recover the money paid to depositors as insurance.
KDIC president and CEO Gwak Bumgook said that the deposit insurer would attempt to offload its 62 percent stake in Tomato Specialized Bank during the first half of the year. The remaining 38 percent stake would stay with local shareholders.
“We will try to sell the stake at a fair market value through a bidding process,” he said, adding that he could not disclose the proposed value of the sale.
KDIC, which opened i t s f i r s t ov e r s e a s b r a n c h i n Phnom Penh last week, will work with potential buyers and help settle disputes with local shareholders.
“Our mandate is not just focused on collection, but also normalising a business and finding the right investor that can create value on existing assets,” he said.
Kim Doo-yoon, a former KDIC investigator who serves as CEO of Tomato Specialised Bank, said the proposed sale did not represent a retreat from the local market.
“The ultimate decision over Tomato will depend on the KDIC and how it wants to achieve better performance to make sure that it meets the central bank’s minimum capital requirements,” he said. “They are considering every option to do this.”
Tomato Specialized Bank’s existing shareholding structure includes KDIC and five Cambodian investors. According to Kim, the shareholders are embroiled in a lawsuit that is preventing a sale.
“Currently there is a lawsuit among the shareholders in Cambodian courts with Tomato arguing that some of the Cambodian shareholders are invalid,” he said.
Nevertheless, Kim pointed out that since 2011 Tomato Specialized Bank has made impressive strides in normalising its operations by seizing back assets. He said the bank has turned a profit for the last three years by offering special low interest rate loans and conducting interbank lending.
“The way we seized back assets was by taking legal actions properly and putting up a property for public auction,” he said. “This has allowed us to actively disperse loans to Cambodian clients and to other financial institutions.”
It is also hoped that the new investor will help Tomato Specialized Bank meet the revised minimum capital requirement of the National Bank of Cambodia (NBC). The bank, which had $8.2 million in paid-up capital as of end2015, according to NBC data, will need an additional $7 million by March 2018 to meet the threshold level.
“We want the bank to contribute to the development of the market and we need someone that will inject some capital,” Kim added.
Stephen Higgins, managing partner of investment firm Mekong Strategic Partners, said that KDIC would face challenges to get a “more than nominal price for [ Tomato Bank’s] assets.”
“The brand itself doesn’t help,” he said. “It doesn’t have distribution, it doesn’t have a meaningful customer base and it only has a specialised bank status. So it’s quite restricted in what it can do” to find a buyer.