This article was published on Aug. 7, 2025, at 4:34 p.m. on the ChosunBiz MoneyMove site.
SK Square has decided to exercise its call option on the e-commerce platform 11Street as early as early October. Although it previously waived its rights at the end of 2023, this time there is a strong possibility that it will actually exercise the option.
However, the amount for exercising the call option is a variable. To acquire the entire equity of financial investors (FIs), approximately 600 billion won is needed, which includes the principal of 500 billion won plus interest, but it is reported that SK Square feels that investing the entire amount is burdensome. Accordingly, the possibility of executing only part of the option while deferring the remaining payment through convertible bond (CB) issuance is being seriously considered. SK Square is also said to be contemplating a way to repay without exercising the call option.
◇ Call option exercise possible again after two years of waiver
According to investment banking (IB) industry sources on the 7th, SK Square is seriously considering purchasing FIs' equity during the secondary call option exercise period, which begins on Oct. 3 this year. The secondary call option exercise is possible for two months until the end of December.
Since the call option can be exercised as early as early October, it is possible that SK Square will convey its intention to exercise to the FIs around early September.
In 2018, SK Planet, the operator of 11Street, conducted a third-party allocation capital increase targeting the Nile Holdings Consortium (National Pension Service, H&Q Korea Partners, MG Saemaul Geumgo) during the spin-off process, transferring 18.18% equity and receiving an investment of 500 billion won.
The National Pension Service invested 350 billion won in the project fund it joined alone, H&Q's third blind fund invested 100 billion won, and MG Saemaul Geumgo's project fund invested 50 billion won in Nile Holdings.
The contract included a call-and-drag provision. If the initial public offering (IPO) is not completed by Sept. 30, 2023, the consortium can force the sale of SK's equity (drag along), while granting SK the option to repurchase their equity before that (call option).
At that time, SK reportedly persuaded the FIs to enter into such a contract, stating that the conditions were 'practically close to a put option.' Including a put option would recognize it as a liability in accounting terms, as it would become money that must be repaid in the future, thereby being accounted as debt rather than investment. In contrast, receiving investments under the call-and-drag conditions allows only a portion to be reflected as debt.
However, SK Square waived its rights during the exercise period of the first call option in November 2023. After that, financial investor H&Q sought to transfer management rights, including SK Square's equity, to a third party, but it did not materialize. Fresh food company OA once attempted to acquire it but ultimately withdrew, and other potential candidates showed little interest. Time has passed, and the moment for the second call option has arrived after two years.
◇ SK sees full repayment as difficult... Deferring repayment of the balance through CB issuance?
Throughout this period, industry experts have pointed out that SK Square ultimately needs to resolve the 11Street issue. From the perspective of the FIs, they accepted the call-and-drag conditions trusting SK's creditworthiness, and thus SK should take responsibility for repayment.
Moreover, the FIs of 11Street include the National Pension Service, and public funds like the Teachers' Pension could be involved as limited partners. An IB industry insider noted, 'The investment amount of the National Pension Service in 11Street is equivalent to two years' worth of pensions for tens of thousands of citizens.'
If SK Square decides to exercise the call option this time, the amount will likely be the key factor. The total debt SK needs to repay to the FIs is estimated to reach approximately 630 billion won, including the principal of 500 billion won and interest (internal rate of return of 3.5%).
According to IB industry sources, SK Square internally assesses that it does not have the capacity to repay the entire amount. There is also the issue of 'breach of trust,' which was used as a basis for rejecting the call option two years ago. At that time, SK Square argued that considering 11Street's current corporate value, repurchasing 18.18% equity at 550 billion won could constitute a breach of trust regarding the company. This logic remains valid for SK Square today.
If SK Square is unable to repay the full amount of 500 billion won and interest this time, it is highly likely that measures such as issuing convertible bonds (CB) to defer repayment of the remaining balance will be taken.
A capital market specialist lawyer stated, 'If the call option is only partially exercised, both companies will need to reach a separate agreement,' adding that, 'If they plan to issue a CB and state that they will repay the remaining balance later, they must give SK Square's CB rather than 11Street's.'
For instance, if SK Square plans to exercise the call option for only 400 billion won and intends to repay 230 billion won later, it is likely that they will issue SK Square's CB to the FIs, allowing them to convert this CB into an amount greater than 230 billion won in the future. In this case, the FIs can ensure full recovery while also aiming for capital gains due to stock price increases.
Another lawyer mentioned, 'Ultimately, since the sale of 11Street has collapsed, the ball is back in SK's court,' and added, 'Now that SK holds the power, it's much easier to propose exercising only part of the call option while deferring the balance.'
◇ National Pension Service's 'occasional investment' depends on SK
If SK Square exercises the call option this time, it is expected to facilitate the formation of H&Q's fifth blind fund. This is because it can challenge the National Pension Service's occasional investment. H&Q's fifth blind fund is being formed with a target of 600 billion to 700 billion won and has so far secured investment funds from entities like the Teachers' Pension.
The National Pension Service previously invested 170 billion won in H&Q's fourth blind fund, achieving an internal rate of return of 27%. This is considered an exceptionally high yield in the industry.
The overall performance of the investment executed by the National Pension Service through H&Q depended on 11Street. If SK Square exercises the call option this time, the IRR of the 350 billion won invested in the project fund by the National Pension Service will become 3.5%. When adding the recovery performance from both the blind fund and project fund, the total is estimated to be around 14-15%.
Conversely, if the National Pension Service assumes that it cannot recover even a single won from the 11Street investment, the IRR of the National Pension investment through H&Q will drop to 2%.