MBK Partners has caused significant confusion among investors who acquired Homeplus stores due to a single word in the 'application for commencement of rehabilitation proceedings' submitted to the Seoul Rehabilitation Court.
When MBK acquired Homeplus in 2015, the number of stores was 142, but it has now decreased to 126 (60 directly managed stores + 66 leased stores). After closing locations such as Ansan, Daejeon Dunsan, and Tanbang, they sold the stores as well as the site in Mokpo, the site in Namyangju Byeollae, and the training center on Muido Island in Incheon. The 66 leased stores, many of which have been sold with ownership transferred, are currently operated under the 'sale and leaseback' method, entering into long-term lease agreements simultaneously.
The main investors in the leased stores include construction companies, development companies, asset management companies, and securities firms. The largest development company in the country, MDM Group, acquired 10 stores through the 'specialized real estate investment trust'. Additionally, more than 10 construction companies and financial firms have acquired stores in the same way. It is known that the funds paid to MBK in the sale and leaseback method exceed 2 trillion won.
However, the rehabilitation application submitted by MBK Partners contains terminology suggesting that it still holds ownership of the sold stores. This is akin to claiming, after selling an apartment and leasing it back for rent, that 'ownership of the apartment has never been transferred'.
Some analysts expect that MBK will argue that it has never transferred ownership of the land and buildings of the stores it has already sold in order to negotiate lower or waived rent. If MBK holds out without paying rent, investors who purchased Homeplus stores will struggle to repay the loans obtained from first and second-tier financial institutions, potentially leading to numerous stores being auctioned and even the bankruptcy of Homeplus.
According to the financial investment and legal industries on the 25th, Homeplus stated in the 'application for commencement of rehabilitation proceedings' submitted to the Seoul Rehabilitation Court on the 4th that it would treat damage claims as 'rehabilitation collateral'. The 40-page application discussing the feasibility and methods of rehabilitation stated, 'We intend to create necessary surplus cash flow for the benefit of rehabilitation creditors by attempting to adjust rent with the lessee and utilizing the right to terminate the bilateral contract according to Article 119, Paragraph 1 of the Debtors' Rehabilitation and Bankruptcy Act, and by treating the damage claims resulting from the termination as rehabilitation collateral.'
The term that has caused confusion among investors who purchased the land and buildings of the stores through the sale and leaseback method is 'rehabilitation collateral.' This is because the term rehabilitation collateral cannot be used for assets that have already transferred ownership.
An investment banking industry official noted, 'When the stores are transferred through sale and leaseback, this is a claim that they were given as collateral, not ownership,' adding, 'It seems that a private equity fund that understands the law is intentionally using such terminology to confuse investors and employ a brinkmanship strategy.' This means that they did not sell the stores but rather pledged them as collateral to obtain a type of loan. In this case, if the contract is terminated, ownership of the stores will revert to MBK Partners.
MBK Partners has not officially expressed its position on the term rehabilitation collateral. However, mentions from officials and the audit report submitted to the financial authorities contain references that could support the investors' claims.
A notable instance is the statement made by Kim Kwang-il, vice chairman of MBK Partners and co-CEO of Homeplus, during a meeting of the Political Affairs Committee held at the National Assembly in Yeouido, Seoul, on the 18th. Vice Chairman Kim attended the meeting and responded to questions from Democratic Party lawmaker Lee Kwang-il regarding 'How much is the sale price of Homeplus stores after the acquisition by MBK?' stating, 'It is about 1.7 trillion to 1.8 trillion won.' In response to the lawmaker's point that 'the amount is much lower than what is known,' saying 'it should be at least 4 trillion won or more,' Vice Chairman Kim said, 'That portion (4 trillion won) includes aspects related to the financial product known as sale and leaseback.'
The 1.7 trillion to 1.8 trillion won mentioned by Vice Chairman Kim refers to the sale amount for stores and sites that MBK decided to close after acquiring Homeplus in 2015, excluding the sale amount for locations that continue to operate under the sale and leaseback method.
Kim Kwan-ki, the representative attorney of Kim Park Law Office, who drafted the rehabilitation application, stated, 'I cannot comment on the meaning of rehabilitation collateral due to client confidentiality obligations.'
There are also relevant mentions in the audit report submitted by Homeplus to the Financial Supervisory Service at the end of May last year. In the audit report, Homeplus stated, 'We are leasing various offices, warehouses, and stores.' It further stated, 'The transfer of assets through a sales and leaseback transaction was assessed according to the Corporate Accounting Standards No. 1115, and if it does not correspond to a true sale, the receipt transaction of the sale price was recognized as a collateral-based borrowing transaction.' This implies that there are locations that were not genuinely sold, thus the proceeds from those sales were accounted for as loans.
There is no precedent for claiming rehabilitation collateral for sale and leaseback contracts where ownership registration has occurred. Therefore, if MBK mentions rehabilitation collateral as stated in the rehabilitation application and claims, 'Ownership of the stores has never been transferred,' it is expected that investors will find it difficult to recover damages if Homeplus terminates the lease contract.
Numerous investors, including IGIS Asset Management, Industrial Bank of Korea, NongHyup, DL Group, Marston Investment Management, MDM Group, and KB Real Estate Trust, will also face restrictions on property rights. Additionally, it may become difficult for investors to recover loans obtained from first and second-tier financial institutions during the acquisition process of the stores. The estimated amount of loans is around 5.5 trillion won. The book value of the 66 stores currently under lease operation reaches 7.3 trillion won.
Byun Seon-bo, an attorney at the law firm Ji-eum, stated, 'Unless it is said that there is something equivalent to collateral regarding the Homeplus stores for which ownership has been secured, the terminology does not make sense,' adding, 'The lease contracts resulting from the sale and leaseback are not subject to rehabilitation collateral.' Park Seong-ha, an attorney at the law firm Dongin, stated, 'While the specific contractual relationships should be examined, it appears that MBK asserts that the sale and leaseback transactions were a type of 'transfer collateral' for borrowing money, claiming it is not a true sale, while the sale and leaseback investors seem to claim they received actual ownership.'