The National Assembly should approve the state guarantee of the Korea Development Bank’s debts in June for the bank’s initial public offering, said Chu Woo-sik, senior deputy president of KDB Financial Group.

“If the IPO is not done, the government’s overseas strategies may encounter problems and prices of government bonds or the national credibility could be negatively influenced,” said Chu on Tuesday at a press conference in central Seoul.

“As the local law for the privatization of KDB was created in cooperation between the ruling and opposition parties, I am sure that both will agree (on the state guarantee).”

The state-run financial firm has been pushing its privatization process since 2009 as a goal to turn into a global commercial investment bank. The government has to sell its shares in KDB no later than 2014, according to the local law. KDB hopes to do the IPO within the year, before a new administration inaugurates in 2013.

“The IPO does not directly mean privatization but it is the most general way of selling shares for the first time,” explained Chu.

He added that KDB’s case is expected to be the most crucial issue in Asia’s IPO market in the latter half of this year.

“The fact that a global financial group is preparing for an IPO is creating a stir. Values grow when a state-run firm privatizes as many regulations get unlocked. We are not thinking about pre-IPO placements, I think investors will jump right in without it. We are already receiving positive responses,” said Chu.

The proceeds from the sale will be used to fund the government’s financial policies.

Once turned into a market player, KDB aims to attract local and foreign investors and grow into a global CIB through mergers and acquisitions. It will also seek ways to advance overseas and deliver development finance know-how to emerging markets in Asia, the Middle East and Africa.

By Park Min-young (claire@heraldcorp.com)