Homeplus faces scrutiny over loan terms and disclosure failures amid credit downgrade

Kim Jeong-ho, president of Shinyoung Securities, noted on the 18th, "Homeplus was not aware that it would have to repay 250 billion won to Meritz Financial Group in June."

President Kim attended a general meeting of the National Assembly's Political Affairs Committee that day and, in response to a question from Kim Jae-seop, a member of the ruling People Power Party, regarding whether they continued to issue asset-backed securities despite being aware of the 250 billion won maturity, he said, "I was only aware of the 1.3 trillion won loan secured by collateral in real estate."

According to Member Kim, Meritz Financial Group reportedly inserted a clause stating that upon lending Homeplus 1.3 trillion won last May, it needed to repay 250 billion won within 12 months and that if it failed to do so, it could dispose of the real estate pledged as collateral.

Member Kim pointed out that with Homeplus securing working capital by issuing commercial paper (CP) in the short-term money market, as the likelihood of failing to meet the condition of early repayment of 250 billion won increased due to a credit rating downgrade at the end of last month, it might have led to the application for corporate rehabilitation proceedings (court management).

Shinyoung Securities is under suspicion of incomplete sales for selling financial products without adequately disclosing the credit risk of Homeplus. This occurred three days before the credit rating downgrade, which triggered the application for corporate rehabilitation, on the 25th of last month when it issued 82 billion won worth of asset-backed securities.

Kim Gwang-il, vice chairman of MBK Partners and co-CEO of Homeplus, stated, "I understand that the condition of 'repayment of 250 billion won within 12 months' was communicated to Shinyoung Securities," adding, "It is a major condition, so it couldn't have gone unexplained."

Vice Chairman Kim also explained that he did not expect the short-term credit rating downgrade. He said, "Although performance worsened due to COVID-19, sales have steadily increased over the past two years," and added, "The recent increase in the issuance scale of short-term electronic bonds is also a result of increased sales."

Meanwhile, the Financial Supervisory Service has begun inspections targeting securities firms related to the asset-backed securities of Homeplus, which has entered the rehabilitation process. Kim Byeong-hwan, chairman of the Financial Services Commission, stated that day, "We will thoroughly investigate to determine whether there are any violations and respond strictly."