Korea Ratings said that MBK Partners, the largest shareholder of Homeplus, likely recognized a downgrade in credit rating before the 28th of last month. That date was when credit rating agencies downgraded Homeplus' short-term credit rating from A3 to A3-. On the next business day, the 4th, MBK Partners immediately applied for corporate rehabilitation procedures, citing that the lower credit rating increased the burden of financing.

Shinyoung Securities also noted that considering the typical capital market procedure, MBK Partners would have known before the announcement of the confirmed credit rating. Shinyoung Securities is the underwriter for Homeplus' asset-backed short-term securities (ABSTB).

Kim Ki-beom, the representative of Korea Ratings, is present as a witness at the urgent inquiry of the National Assembly's Political Affairs Committee regarding 'Homeplus, MBK Partners, and SAMBU Construction' held in Yeouido, Seoul on the morning of the 18th./Courtesy of Yonhap News
Kim Ki-beom, the representative of Korea Ratings, is present as a witness at the urgent inquiry of the National Assembly's Political Affairs Committee regarding 'Homeplus, MBK Partners, and SAMBU Construction' held in Yeouido, Seoul on the morning of the 18th./Courtesy of Yonhap News

On the 18th, Kim Ki-beom, representative of Korea Ratings, attended a full meeting of the National Assembly's Administrative Committee and said, "(Homeplus would have been able to) predict the downgrade in credit rating internally." Shinyoung Securities issued Homeplus ABSTB for the last time on the 25th of last month, and if MBK Partners planned to apply for rehabilitation beforehand, it could be seen as fraudulent.

On that day, Min Byung-duk, a member of the Democratic Party, texted, "If (the company's credit) rating seems likely to drop, don't you request supplementary materials on how to improve the financial situation?" In response, Kim said, "That’s correct. (In the case of Homeplus, we) requested supplementary materials."

Min noted, "Kim Kwang-il, vice chairman of MBK Partners, knew about the downgrade (in credit rating) but still borrowed money to secure funds," adding, "This aspect could have elements of fraud that the Financial Services Commission chairman should examine." In response, Kim Byung-hwan, chairman of the Financial Services Commission, promised, "We will look into it during the inspection process."

Geum Jeong-ho, the president of Shinyoung Securities, is responding to questions from lawmakers during the urgent inquiry related to Homeplus, MBK Partners, and SAMBU Construction held at the National Assembly's Political Affairs Committee in Yeouido, Seoul on the morning of the 18th./Courtesy of Yonhap News

Shinyoung Securities echoed the sentiments of Korea Ratings. Kim Jeong-ho, president of Shinyoung Securities, said, "Securities firms do not discuss credit ratings directly with credit rating agencies, but there must be ongoing exchanges between the issuing company (Homeplus) and the credit rating agency." He further speculated that discussions on what is needed to maintain the rating likely took place.

Shinyoung Securities stated that while MBK Partners knew about the downgrade of Homeplus' credit rating in advance, they were unaware. President Kim expressed, "I am infuriated just to be here," and said, "I completely did not expect the downgrade (and the fact that they applied for rehabilitation on the next business day, March 4) is incomprehensible."

President Kim emphasized, "On the morning of the 25th (of last month), the rating for the asset-backed securities was A3," and added, "If I had heard that the rating was likely to drop that day, I would have demanded Homeplus to cancel the issuance." He further stated, "I heard that the possibility of a downgrade was high after 6 p.m. on February 27."