Bangkok--5 Jun--Standard & Poor's Standard & Poor's Ratings Services said today that it had revised the outlook on its counterparty credit ratings on Korea Development Bank (KDB; foreign currency A/Stable/A-1; local currency --/--/A-1) to negative from stable. The revision is based on the Korean government's announcement that KDB is to be taken private, which would reduce the government support to a part of the bank in future. According to the plan, the bank will be split into two organizations: (1) Korea Development Fund (KDF), which will continue to provide public policy finance; and (2) a bank, which will operate as a profit-maximizing organization. The ownership of the latter will be transferred to a 100% government-owned financial holding company (FHC), which will be set up by December 2008. In January 2009, the government will transfer 49% of its stake in the FHC to KDF. KDF will divest its stake in FHC between 2009 and 2010, after which the government will sell the remainder of its holdings (51%) in the FHC from 2011 to 2012. In the meantime, the government will guarantee or provide equivalent measures for existing KDB's bonds in order to avoid investors' demands for early redemption. While the government holds a controlling share, it can guarantee any new bonds that KDB will issue, subject to the prior approval of the national assembly. While it remains the controlling shareholder, the government is also responsible for maintaining the bank's positive net asset value. Standard & Poor's credit ratings on KDB have been based on the bank's public policy role as the primary governmental financial institution that extends medium- to long-term financial facilities to support the industrial policy objectives of the government of the Republic of Korea (foreign currency A/Stable/A-1; local currency A+/Stable/A-1). The bank is fully owned by the government. Media Contact: David Wargin, New York (212) 438-1579 [email protected] Analyst Contacts: Takahira Ogawa, Singapore (65) 6239-6342 JaeMin Kwon, CFA, Hong Kong (852) 2533-3539