**Briefing Following the Securities Firm CEO Meeting on May 5**
The Financial Supervisory Service (FSS) is focusing on the possibility of payment settlements following Homeplus, the second-largest hypermarket in South Korea, entering rehabilitation proceedings. Meritz Securities, which lent significant funds to Homeplus, believes there are no major issues given the substantial collateral it holds. However, the FSS has refrained from commenting on the accountability of the largest shareholder, MBK Partners, which contrasts with its previous stern stance towards Taeyoung Construction.
On May 5, FSS Governor Lee Bok-hyun addressed reporters after a meeting with CEOs of securities firms at the Korea Financial Investment Association in Yeouido, Seoul. He stated, “We are closely monitoring the operation of firms normalizing business-related payment settlement of commercial credit (gift certificates) issues that might arise.”
Homeplus filed for corporate rehabilitation with the Seoul Bankruptcy Court recently. They cited the proactive measure was due to a credit rating downgrade from A3 to A3-, suggesting potential funding issues. Although gift certificates can be fully repaid during the rehabilitation process, this requires court approval. Some companies like Shilla Duty-Free, CJ Foodville, and Outback Steakhouse have stopped accepting Homeplus gift certificates, fearing payment delays.
Governor Lee stated, “It will be difficult for Homeplus to secure additional accounts receivable collateral loans from financial institutions,” adding that the situation would be closely monitored similar to Taeyoung Construction. He assessed that Meritz Securities, which has financial exposure to Homeplus, is unlikely to face significant difficulties. Last year, Meritz Financial Group lent Homeplus approximately 1.3 trillion won, having recovered about 100 billion won, with land valued at nearly 5 trillion won as collateral.
Lee mentioned, “Due to diverse real estate assets typical in the distribution industry, we do not foresee massive losses for Meritz Financial Group,” and remarked the exposure analysis for each company is within a manageable range. He also indicated contingency plans are under review, but avoided preemptive statements as excessive.
Regarding MBK Partners’ accountability, Governor Lee showed a lukewarm response. MBK acquired Homeplus from UK’s Tesco in 2015 for over 7 trillion won and decided on rehabilitation after consecutive losses.
This stance differs from the situation with Taeyoung Construction in 2023 when Governor Lee criticized its workout proposals, claiming it burdened others while the major shareholder contributed nothing financially.
Governor Lee commented on MBK Partners, stating, “Certain industries might not align with the private equity fund (PEF) system and investment return structure, and this aspect needs consideration.”
Previously, he highlighted potential pitfalls when financial capital, like private equity, dominates industrial capital, revealing that a study has been commissioned from the Capital Market Research Institute. He expects the results within the first half of the year, which might lead to the Financial Services Commission conducting further evaluations of PEF regulations.