Homeplus and its major shareholder MBK Partners, which had claimed to have applied for corporate rehabilitation procedures (court receivership) due to a credit rating downgrade, were found to have been aware of the downgrade in advance.
Homeplus and major shareholder MBK are facing criticism for causing losses to innocent investors by issuing corporate paper (CP) just before applying for rehabilitation procedures, ostensibly due to a credit rating downgrade on 4th. The backlash is expected to grow.
Homeplus stated on the 13th through a press release, “On Feb. 25 at around 4 p.m., a practical officer from one credit rating agency informed us that the preliminary evaluation results indicated a downgrade in credit rating, contrary to our expectations, and requested confirmation on whether we intended to apply for a review.”
Homeplus continued, “While our business indicators have greatly improved, with both online and offline sales increasing for three consecutive years, and financial indicators and revenue structures expected to improve significantly through the sale of Express, we could not accept the downgrade decision. Thus, we immediately requested a review the following morning, on the 26th.”
It was noted, “Despite our request for a review, we received the final credit evaluation results from the credit rating agency late in the afternoon of Feb. 27, stating our credit rating had been downgraded.”
Such claims contradict Homeplus’s assertion that it was unaware of the downgrade beforehand. Homeplus had maintained that the credit rating agencies’ downgrading of the credit rating for corporate paper (CP) and short-term bonds from “A3” to “A3-” on Feb. 28 was an “unexpected situation,” and had disclosed that it had unexpectedly applied for corporate rehabilitation procedures to the Seoul Rehabilitation Court early in the morning of the 4th.
The day before, Homeplus claimed, “We received notification at around 5 p.m. on Feb. 27 that our credit rating was going to be downgraded,” asserting that “Shinyoung Securities' claim that we knew about the downgrade before issuing the short-term bonds on Feb. 25 is false.”
With the initiation of Homeplus's rehabilitation procedures, credit ratings for CP and short-term bonds have dropped to 'D.' As of 4th, the outstanding balance of CP and short-term bonds stood at 188 billion won. CP and short-term bonds are unsecured financial products and are last in line for repayment, meaning losses are unavoidable.
Knowing in advance about the possibility of severe repercussions from the credit rating downgrade in the short-term funding and bond circulation market and still selling CP and other products to general investors causing losses could result in legal penalties.
Shinyoung Securities, one of the underwriters for Homeplus's asset-backed securities issuance, is considering filing a criminal complaint, alleging that Homeplus was aware of the potential for a credit rating downgrade in advance but issued asset-backed short-term bonds (ABSTB) just before the downgrade to shift losses to individual investors.
Homeplus clarified, “We received a response from Shinyoung Securities indicating that the maximum amount we could issue was only about 40% of the previous issuance amount. This drastically reduced the scale of funding we could secure, leading us to conclude that there was a possibility of a liquidity issue, which resulted in our urgent application for rehabilitation procedures at the court on March 4, at the end of the holiday period.”
Furthermore, they claimed, “The purchase receivables securitization that was paid on the 25th was approved on the day prior, on the 24th, and was completed before receiving the preliminary credit rating evaluation results on the afternoon of the 25th.”