It has been confirmed that IGIS Asset Management supported more than 50 billion won for a family company of this company's former CEO and set aside more than half as allowance for doubtful accounts. The financial investment industry is raising controversy over potential conflicts of interest and possible violations of the Financial Investment Services and Capital Markets Act.
According to the Financial Supervisory Service's electronic disclosure system on the 10th, IGIS Investment Partners, a subsidiary of IGIS Asset Management, provided 54.4 billion won in long-term loans to Ecogrid Solar, an investment company for solar power generation projects, as of the end of December last year. The spouse of former IGIS Asset Management CEO Cho Gap-ju, a person surnamed Lee, is the largest shareholder (42.0% equity) of Sky Value, and Ecogrid Solar is a subsidiary of a company (Ecogrid Solution) wholly owned by Sky Value. The spouse of the late former chair Kim Dae-young, the largest shareholder and founder of IGIS Asset Management, Son Hwa-ja, also holds 29.0% equity in Sky Value.
Former CEO Cho Gap-ju served as CEO of IGIS Asset Management for seven years from 2014 to 2021. Cho currently remains an inside director at IGIS Asset Management. Counting the 9.9% held by family company GF Investment, Cho holds about 12% equity in IGIS Asset Management.
IGIS Investment Partners is also setting aside an allowance for doubtful accounts amounting to half of the funds lent to Ecogrid Solar. After setting aside about 5.8 billion won as an allowance for doubtful accounts in 2023, it added about 27.0 billion won by the end of December last year. This amounts to about 60% of the total loan, suggesting that IGIS Asset Management internally judged there are difficulties in recovering the loan.
The investment banking (IB) industry pointed out that a subsidiary of IGIS Asset Management, a financial investment business entity, extending credit to related parties including major shareholders could potentially violate the Financial Investment Services and Capital Markets Act.
An IB industry source said, "The capital markets law strictly restricts financial investment businesses from extending credit to major shareholders and their related parties," adding, "IGIS Asset Management could have set up a special purpose company (SPC), kept it as an affiliate, and managed it, but having a company controlled by related parties—family members as major shareholders—exercise control is hardly typical."
IGIS Asset Management said this was a "rescue finance" structure designed to revive a distressed fund and prevent investor losses, and argued it was not a conflict of interest. A representative of IGIS Asset Management said, "If IGIS Investment Partners directly owned the SPC, the distressed establishment's liability would have been consolidated into IGIS Asset Management and could have negatively affected the financial statements, so we transferred it to a third party (Sky Value) capable of close communication during the rehabilitation process."
The representative added, "Ecogrid Solar is purchasing distressed establishment loan claims with the lending and is normalizing the business," and "As an SPC, Ecogrid Solar was used as a simple investment conduit; given the nature of infrastructure investment, once the business is effectively normalized, the revenue is attributed to IGIS Investment Partners during the loan repayment process."
However, the IB industry said that even if the purpose was to normalize a distressed fund, it is not proper to have used a company controlled by related parties with a split equity structure.
A senior IB industry official said, "They claim there is no real benefit tied to the nominal equity, but after the business is normalized and the power plant is sold, won't the remaining profit—after the lending is repaid—flow to Sky Value, which is controlled by related parties?" adding, "Whether there is a legal violation needs to be examined, but it is undeniable there is an ethical issue in a structure where losses go to the asset manager and profits go to the owner family."