HSBC, Lone Star extend bank contract by 3 months

Last year, London-based HSBC Holdings PLC announced plans to acquire Lone Star's 51 percent controlling stake in Korea Exchange Bank pending regulatory and government approval.

HSBC said Tuesday in a statement to the Hong Kong stock exchange that its subsidiary HSBC Asia and Lone Star agreed to extend the acquisition agreement to July 31. The original contract was to have expired Wednesday.

Efforts by Lone Star to sell its stake in KEB have been stymied by various legal and tax disputes, compounded by negative sentiment in South Korea toward foreign investors seen as profiting after taking stakes in distressed South Korean companies.

The case has been closely watched by foreign investors in South Korea.

Dallas, Texas-based Lone Star has long battled suspicions that it was able to purchase the bank at a bargain price after colluding with government officials to understate the bank's financial health, accusations it has denied.

Earlier Tuesday, South Korea's Financial Services Commission Chairman Jun Kwang-woo told reporters that regulatory approval would not come before the original Wednesday deadline.

Jun also said that the new pro-business administration of South Korean President Lee Myung-bak "is trying to take proactive steps on this matter to find a way to resolve this," though he did not elaborate.

Shares in KEB finished unchanged Tuesday at 15,700 won ($16). The announcement came after the close of trading in Seoul.

__