Meritz Financial Group resolved to lend 100 billion won in debtor-in-possession (DIP) emergency operating funds to Homeplus Co., which is undergoing rehabilitation proceedings. But because that falls short of the 200 billion won needed for rehabilitation, projections are emerging that the process has effectively hit a red light.
According to the investment banking (IB) industry on the 18th, Meritz Financial convened a board meeting the previous day and resolved to deposit a 100 billion won DIP loan for Homeplus Co. into an escrow account within the group.
The issue is the loan conditions. Meritz Financial attached additional terms requiring joint guarantees from MBK Partners' corporate entity and Chair Kim Byung-ju personally. It was also conveyed that MBK must directly raise the remaining 100 billion won needed for the rehabilitation plan.
On this, Meritz Financial said, "We have presented all the conditions we can offer to close the transaction and make it clear that we have done everything we can."
However, there is also a view that a scenario in which MBK directly raises an additional 100 billion won is virtually impossible. MBK, though an asset manager, said it has provided about 220 billion won directly and indirectly since the start of the rehabilitation proceedings and has used its available credit up to the limit.
Meritz Financial also suggested using "consent to establish a subordinated security interest on real estate trust assets" as an additional funding measure, but MBK is said to view it as unrealistic.
That is because, for corporations that have entered rehabilitation, it is difficult for creditor banks to agree to establish additional subordinated collateral rights.
Homeplus Co. now faces a bankruptcy crisis due to a cash drain. If additional funding does not materialize, projections are emerging that a chain of bankruptcies among related firms and employment instability for workers could become reality.