The Financial Supervisory Service has begun an inspection into MBK Partners regarding the Homeplus situation. MBK Partners is the largest shareholder of Homeplus and is suspected of issuing bonds while planning to apply for corporate rehabilitation. If they issued bonds while having plans for rehabilitation to attract investor funds, it would constitute fraud.
On the 19th, Lee Bok-hyun, the head of the Financial Supervisory Service, held a meeting with reporters at the headquarters in Yeouido, Seoul, and said, “To confirm the suspicions raised by the Homeplus situation, we will begin inspections into MBK Partners today,” adding, “We will also initiate an investigation into unfair trading.”
Since the 13th, the Financial Supervisory Service has been inspecting Shinyoung Securities, the lead underwriter of Homeplus's card payment-based Asset Backed Short-Term Bond (ABSTB), and Korea Ratings, the credit rating agency. They plan to expand the targets to include MBK Partners. The FSS plans to establish a Homeplus task force led by Ham Yong-il, the deputy head of the capital markets sector, to operate until the first half of the year.
Lee noted, “I believe it is not desirable to actively exercise individual inspection rights over institutional private equity funds,” but added, “Nonetheless, there is a need to inspect MBK Partners due to the Homeplus situation.”
The current inspection into MBK Partners is expected to focus on the timing of the recognition of Homeplus's credit rating downgrade, the timing of the rehabilitation application, suspicions of unfair transactions during the issuance and sale of the short-term bonds, and whether there was an infringement on the National Pension Service's interests in the process of transferring redemption rights of the redeemable convertible preferred shares (RCPS).
The FSS plans to adjust the timing and intensity of checks for incomplete sales during the inspection process, considering the judgment of the rehabilitation court. Lee explained, “This comprehensively means whether ABSTB is included as trading receivables, whether the debtor applies, etc.” If the court classifies ABSTB as trading receivables, investors can recover their investments; conversely, if classified as financial debt, the likelihood of repayment decreases.
Lee stated regarding the nature of ABSTB, “It is the securitization of receivables generated from using purchase-only cards,” and added, “In economic terms, it can be closely related to trading receivables, and in structural terms, it can be disconnected and seen as financial debt.” It has not been distinctly categorized as either trading receivables or financial debt.
He assessed, “It would have been easier to conclude if ABSTB had not dropped significantly into retail, but that’s not the case, which is why there's much controversy.” According to data received from the Financial Supervisory Service and the financial investment sector by Kwang-il Kim of the People Power Party, as of the 3rd, the total remaining balance of Homeplus's corporate commercial paper (CP), card payment-based asset-backed securities, and short-term bonds is 594.9 billion won. Of this, the amount sold to individual investors is 207.5 billion won.
Currently, the FSS is analyzing the daily unpaid status with the cooperation of the executive in charge of restructuring at Homeplus.
Lee strongly criticized MBK Partners, which triggered the situation. He said, “Homeplus needs to demonstrate genuine integrity to show itself as a trustworthy partner to its suppliers and investors,” adding, “In that sense, it is very regrettable that Chairman Kim Byeong-joo of MBK Partners was absent from the previous day's meeting of the National Assembly’s Political Affairs Committee.”
He also criticized the remarks of Vice Chairman Kim Kwang-il of MBK Partners, who attended the Political Affairs Committee in place of Chairman Kim the previous day. Lee stated, “(Vice Chairman Kim) said in the National Assembly that he would abide by the court's decision, but that reads as them not organizing their positions,” and emphasized, “Even if they throw out a commitment to guarantee the principal amount, the bonds must be included in the (court's) rehabilitation plan.” This means the bonds must be included in the court's rehabilitation plan for investors to have a chance to recover their funds.
He remarked, “MBK Partners' statement yesterday amounts to a general claim that they will follow the law,” adding, “They are not in a position to define the legal nature of ABSTB, but they should clarify who will be responsible if losses occur.”
Nonetheless, he refrained from commenting on the ongoing inspections of Shinyoung Securities and Korea Ratings. Lee stated, “Even if we have unearthed some fragmented facts, there are many players, so we need to see the overall picture,” and requested, “Please allow me time to share based on solid evidence.”
In response to claims that the short-term funding market has tightened due to Homeplus's application for rehabilitation, he drew the line, saying, “That is not the case.” According to the FSS, since Homeplus applied for the corporate rehabilitation process on the 4th of this month, A1 credit ratings have seen a net issuance of 1.4 trillion won, and A2 and A3 have had minimal net repayments, but this is a typical flow.
Lee stated, “There is no case of a drastic decrease in issuance,” and added, “Unlike during the times of Legoland and TAEYOUNG E&C, the market is operating normally, so there is no need to be anxious.”