Domestic securities firms have actively sold short-term debt instruments related to Homeplus, such as commercial papers (CP), electronic short-term bonds (STB), and asset-backed electronic short-term bonds (ABSTB), through their retail channels, raising concerns that the scale of individual investor damage will continue to grow. Homeplus issued CP and other instruments to raise funds right up until its application for corporate rehabilitation.
Retail sellers are not necessarily at fault, as the short-term bond credit ratings were in the A3 range when sold but plummeted to default grade afterward. Due to the complex structure of products like ABSTB, many customers likely signed up based only on the recognizable names related to major retail marts, without fully understanding the products.
According to the financial investment sector on the 9th, more than 200 billion KRW worth of Homeplus-related short-term instruments were sold through the retail channels of Hana Securities, one of the major securities firms in Korea. An industry insider estimated that sales to corporate and individual clients were similar, implying that sales to individual investors alone exceeded 100 billion KRW at this firm.
Short-term instruments like CP and ABSTB are bonds issued by companies to raise operating funds, with maturities of less than one year. Specifically, ABSTB is a financial product issued through a special purpose company (SPC) to monetize assets like real estate held by the company, with a maturity of three months. Industry analysts predict that the sudden initiation of Homeplus’s corporate rehabilitation procedure could result in personal investor losses amounting to several trillion KRW.
Retail sellers enthusiastically sold these short-term bonds without recognizing the potential for credit rating downgrades. A representative from a securities firm mentioned that although Homeplus continued to issue short-term instruments until just before applying for corporate rehabilitation, the credit ratings were not particularly high at A3. However, the attractive interest rates of 6-7% made them popular among investors.
Credit rating agencies downgraded Homeplus’s short-term bond ratings to D, the lowest level among speculative grades, right after the company filed for rehabilitation. As it has entered court management, the possibility of principal losses for individual investors cannot be ruled out.
There is speculation that many individual customers purchased these bonds based solely on the familiar names of large corporations like Homeplus, Hyundai Card, Lotte Card, and Shinhan Card, without fully understanding the product structure. For example, ABSTB is a securitized bond based on credit card receivables that Homeplus, the debtor, has established with a card company, the creditor. When Homeplus buys goods from suppliers with a credit card, the card company securitizes the future receivables from Homeplus and sells them to investors.
An industry insider stated that retail counter staff might not have fully understood the product structure, and even if they did, it would have been challenging to explain it clearly. As a result, individual investors likely focused only on the high interest rates of 6-7%, without worrying about the risk of default, since the names of well-known large marts and card companies were involved.