Iran crude buyer Hyundai Oilbank drops $2 billion IPO plan

South Korean refiner Hyundai Oilbank, a heavy user of Iranian crude, postponed its planned $2 billion initial public offering on Friday due to the euro zone crisis, and ahead of a pending suspension of Iran crude imports on western sanctions.

The pullback adds to a series of major IPO delays or cancellations across Asia in recent weeks as Europe's escalating debt woes have send markets around the world to fresh 2012 lows.

"We've decided to suspend the offering due to uncertainties over the success of the IPO, as the euro zone crisis is spreading across the world and investor sentiment has turned weaker," Hyundai Oilbank said in a statement.

The company said it planned to revive its IPO, worth up to $2 billion, when conditions improved. A float would be the biggest in South Korea so far this year.

"The withdrawal has been widely expected in the market. Hyundai will be dealt the biggest blow should Iran oil imports be suspended because it has the highest portion of Iranian oil imports among local peers," said Lee Jeong-heon, an analyst at Hana Daetoo Securities.

"On top of that, refinery shares have been falling recently on concerns of weaker demand."

Hyundai Oilbank is South Korea's biggest Iran oil buyer, sourcing around 20 percent of its total imports from Iran, higher than the country's 2011 average of 10 percent.

Among Hyundai's listed peers, shares of SK Innovation <096770.KS> fell 17 percent and S-Oil <010950.KS> dropped 24 percent over the last three months, compared with an 8 percent fall in the wider market <.KS11>.

The global IPO market has stalled over the past few weeks, as major stock markets have slumped on fears of a break-up of the euro zone. In Asia alone, five major IPOs were postponed or pulled in recent weeks.

Worldwide, money raised from IPOs has fallen around 46 percent so far this year compared with the same period of 2011, with investors wary of global economic risks and also cautious after last month's botched Facebook offer.

IRAN

The postponement comes as South Korean refiners plan to stop Iranian crude imports when an EU insurance embargo takes effect from July 1, according to sources.

Western countries have stepped up sanctions on Iran over its nuclear programme, which Washington and its allies suspect is a cover for developing the capability to make an atomic bomb.

South Korea, a major buyer of Iranian crude along with China, India and Japan, has won U.S. exemptions on Iran's oil trade sanctions along with six other economies in return for significantly cutting purchases of Iranian oil.

However, it faces separate European sanctions blocking access to tanker insurance, which could cause shipments to grind to a halt from July 1.

Seoul imported more than 250,000 bpd of Iranian crude in April, compared with its term import agreement at 200,000 bpd this year.

Replacing cheaper Iran oil with more expensive oil sourced elsewhere is set to pressure refiners' margins, according to analysts.

"Finding alternate insurers to provide comprehensive cover for tanker shipments is likely to be difficult and costly... Procuring oil from the Singapore spot market is also another possibility, depending on pricing dynamics," Fitch Ratings said this week.

"Higher input costs will... result in some negative implications for South Korean refiners. This will include some margin compression for SK Innovation and Hyundai Oilbank."

In search of alternative supplies, South Korean refiners have diversified crude imports, increasing purchases from Saudi Arabia, the United Arab Emirates and Qatar, as well as North Sea oil, which is now exempt of import tax following a recent free trade deal with Europe.

Hyundai Heavy Industries <009540.KS> holds 91.1 percent of Hyundai Oilbank. Woori Investment & Securities <005940.KS> was the lead manager for the IPO.

Shares in Hyundai Heavy dropped 1.8 percent as of 0215 GMT, lagging a 0.8 percent drop in the wider market.

(Reporting by Hyunjoo Jin and Miyoung Kim; Editing by Richard Pullin)