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Kyobo Life: The Mother of All Puts

AVCJ

08 May 2019

Morrison & Foerster’s Marcia Ellis, co-chair of the firm’s Asia Private Equity Practice, discusses her experience with put options in AVCJ’s article “Kyobo Life: The Mother of All Puts.”

AVCJ reports that the use of put options is rare in Asia, especially when they involve large sums, which makes the put option exercised by a group of investors on US$1.8 billion Kyobo Life shares unprecedented. Ms. Ellis told AVCJ that she can recall only two situations in more than 20 years where puts have been exercised. In both cases, the circumstances were unusual, she said.

“More often, what happens is we say we are going to exercise the put, we prepare a statutory notice that we issue if they don’t pay up, we put all the documents in front of the counterparty, and then we have a negotiation,” said Ms. Ellis. “If they don’t have much money, the put isn’t going to help much. But you could end up doing a different deal with them. Sometimes you sit there with a white board, list their assets and liabilities, and think about how they could be arranged so they can pay you. The last thing the fund wants to do is take a write-down on the investment.”

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