Kross Finance KOREA, a peer-to-peer (P2P) online investment-linked finance firm that entered corporate rehabilitation proceedings (formerly court receivership) due to about 70 billion won in unsettled payments, is struggling to find a new owner. It negotiated a sale with a prospective buyer last year, but the deal is reportedly on the verge of collapse. If the merger and acquisition (M&A) fails and liquidation is decided, Kross Finance KOREA investors are unlikely to recover a significant portion of their principal.
According to the investment banking (IB) industry on the 19th, the Seoul Bankruptcy Court recently scrapped the rehabilitation plan submitted by Kross Finance KOREA and canceled the stakeholders' meeting scheduled for that day. This followed Kross Finance KOREA voluntarily withdrawing the rehabilitation plan.
At the end of last year, Kross Finance KOREA submitted a rehabilitation plan to the court that aimed to restore the corporations through a pre-approval M&A. A pre-approval M&A is a plan to secure a prospective acquirer before the rehabilitation plan is approved and use it to normalize the corporations.
Around September last year, Kross Finance KOREA found a prospective acquirer and entered into talks. After the first bidder dropped the M&A, the process shifted to a public sale, and an e-commerce company emerged as the acquirer. Following multiple delays, the company submitted a rehabilitation plan to the court at the end of last year. The stakeholders' meeting scheduled for that day was to finalize this rehabilitation plan with the creditor group.
However, as the sale process ran into difficulties, Kross Finance KOREA reportedly withdrew the rehabilitation plan on its own. If Kross Finance KOREA fails to close the M&A, the court is likely to proceed with liquidation. With no current sales, liquidation is considered more advantageous than continuing to operate the corporations. If liquidation proceeds, investors' claims could be sold to a third party.
The Kross Finance KOREA unsettled-payments crisis began in mid-2024 when a payment gateway (PG) company failed to repay sales proceeds. Kross Finance KOREA sold a "card sales pre-settlement investment product" secured by small-business owners' accounts receivable as collateral, but Lumen Payments, the PG firm that was supposed to repay the money, did not pay.
In a pre-settlement loan, an investor who has sold products through card payments receives a loan before receiving the settlement proceeds, and the lending institution later collects the settlement from the PG firm. According to the victims' coalition, losses from investors who put money into this product and did not get it back amount to about 72 billion won.