The full loss of over 735 billion won invested in the luxury goods distribution platform Balaan has become unavoidable. This follows Balaan's decision to pursue corporate rehabilitation procedures after delays in settlement. SILICON2, which invested 7.5 billion won through the acquisition of Balaan’s convertible bonds on the 28th, is also facing imminent losses.
According to investment banking (IB) industry sources on the 31st, Balaan applied for corporate rehabilitation procedures at the Seoul Rehabilitation Court that day. Just about a week after the delay in settlement with its vendors on the 24th, all purchases and payments for products on the Balaan platform were reportedly blocked from the night of the 28th.
Che, Hyung-rok, the representative of Balaan, noted in a public announcement, "Balaan has partially secured the investment it planned in the first quarter of this year, but additional funding has been delayed compared to initial expectations, leading to a short-term liquidity crunch." He added, "If we can resolve the liquidity issue, we can normalize operations."
Balaan plans to conduct mergers and acquisitions (M&A) alongside the approval of rehabilitation, but investors, including venture capital (VC), have faced unavoidable losses. This is because after the start of the corporate rehabilitation process, the repayment rights are prioritized in the order of 'secured creditors-unsecured creditors-preferred stock investors-common stock investors.'
Balaan, established in 2015, has reportedly accumulated investment of over 735 billion won. Most of this investment was made by VCs through the acquisition of redeemable convertible preferred shares (RCPS). Major shareholders include KOLON Investment, Woori Venture Partners, and Shinhan Capital.
In this context, VCs have been faced with unavoidable total loss adjustments in their investments. This is due to the conversion from RCPS to common stock last year. When RCPS is converted to common stock, creditors change status to general shareholders, making it difficult to receive repayment for their investments during the rehabilitation process.
It has also been determined that the investment recovery for SILICON2, which made a new investment of 7.5 billion won by acquiring convertible bonds last month, is uncertain. This is because the amount unpaid to its vendors reportedly reaches hundreds of billions won. As of the end of 2023, Balaan's cash assets were only 3.3 billion won.
Meanwhile, Balaan was established as a luxury goods distribution platform in 2015. It experienced rapid growth, taking advantage of the COVID-19 pandemic, and its corporate value was recognized at 300 billion won in 2022, but it faced a crisis due to intensified competition, high-interest rates, and economic recession.