This article was published on Aug. 26, 2025, at 4:11 p.m. on the ChosunBiz MoneyMove site.
As domestic fashion corporation F&F prepares to exercise its preferential purchase rights for the global golf company TaylorMade, Meritz Securities is reported to have proposed funding options to F&F, including acquisition financing, total return swaps (TRS), and redeemable convertible preferred stock (RCPS).
Meritz Securities has recently been expanding its territory while branding itself as a traditional investment bank (IB). However, analysts in the industry suggest that it will be practically difficult for F&F to accept Meritz's proposal. To receive funding through TRS and RCPS, collateral guarantees, such as put options, would be inevitably required, which F&F does not wish.
According to the investment banking (IB) industry on the 26th, Meritz Securities is said to have discussed providing the acquisition funds for TaylorMade through TRS and RCPS with F&F. Assuming the sale price of TaylorMade is 5 trillion won, the additional funds that F&F needs to secure are estimated at about 1.5 trillion won.
According to the IB industry, multiple banks and securities firms, including Meritz Securities, Woori Bank, NH Investment & Securities, KB Securities, and Shinhan Investment Corp., have submitted or are about to submit proposals to F&F.
In the case of acquisition financing, the equity of the acquisition target, TaylorMade, serves as collateral, but TRS is different. It establishes TRS contracts based on F&F's stocks or convertible bonds (CB) as the underlying asset. This means that it raises funds based on F&F's corporate value and credit. After the investment, if F&F generates a certain level of operating profit, it will repay the principal and interest on TRS with that cash flow. Meritz can receive interest in return.
F&F is a company that generates about 400 to 500 billion won in operating profit annually. Its consolidated operating profit last year was 450 billion won, and operating cash flow was approximately 400 billion won. The operating cash flow was about 90% of the operating profit. This means that most of the profit came in as actual cash. In such cases, financial institutions consider the capacity for TRS repayment to be solid.
Meritz is also said to have proposed funding through the issuance of RCPS. F&F would issue RCPS and sell them to Meritz. Although RCPS carries the risk of increasing the issuer's liabilities due to the 'redemption right', F&F's debt ratio was quite favorable at 30% as of the end of the first half of this year. Unlike recent cases where SK Innovation borrowed funds from Meritz, this means they do not have to worry much about increasing liabilities.
However, it is reported that it will not be easy for F&F to accept Meritz's proposal. Whether through TRS or RCPS, structural conditions such as put options are bound to follow. From Meritz's perspective, safeguards against a decline in F&F's stock price or subpar financial performance are necessary.
An IB industry insider noted, "F&F wants a strategic investor without a put option, that is, a long-term partner as the second-largest shareholder."
From Meritz's standpoint, although they have made a proposal, the burden is inevitable. Meritz has recently secured a liquidity deal worth 5 trillion won for SK Innovation's LNG project, and it is in the process of selling off 3 trillion won worth of convertible preferred stock (CPS). If participation from external institutional investors is minimal, the remaining burden will need to be taken on by Meritz's affiliates. In this context, providing more than 1 trillion won to F&F through TRS and RCPS is evaluated as not an easy task.
Additionally, the ongoing conflict between F&F and Centroid Investment Partners regarding TaylorMade may also pose a burden for Meritz. F&F has warned that it will hold Centroid accountable for pushing the sale without their prior consent, whereas Centroid has indicated that it will take legal action if F&F obstructs the sale.
In this regard, a Meritz representative stated, "There is nothing currently progressing regarding F&F's acquisition financing and funding support."