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Homeplus’ entry into rehabilitation escalates into legal disputes
Shinyoung Securities President Geum Jeong-ho speaks during an inquiry session regarding Homeplus’ entry into corporate rehabilitation at the National Assembly, Seoul, March 18. Yonhap
By Jun Ji-hye
The fallout from Homeplus’ entry into corporate rehabilitation is escalating into legal disputes, with Shinyoung Securities and other brokerage firms set to file criminal complaints against the retailer and its management, industry officials said Monday.
Shinyoung Securities, which issued Homeplus’ asset-backed short-term bonds (ABSTBs) through a special purpose company, along with Eugene Investment & Securities, Hana Securities and Hyundai Motor Securities, which sold these bonds, are considering filing fraud charges against the country’s No. 2 supermarket chain and its management as early as this week.
They have since appointed attorneys from law firm Yulchon, among others.
However, the brokerages decided not to include MBK Partners, the private equity firm and largest shareholder of Homeplus, as a target of the complaint at this stage.
On March 4, the retailer suddenly filed for corporate rehabilitation with the Seoul Bankruptcy Court, stating, “The decision was inevitable to proactively ease potential short-term financial burdens arising from a credit rating downgrade.”
Its corporate bond rating was downgraded from A3 to A3- on Feb. 28.
The brokerages believe that the supermarket chain was aware of its credit rating downgrade in advance but still allowed the issuance of ABSTBs. The brokerages, unaware of this, moved forward with the issuance and distribution, and as a result, retail investors are at risk of suffering losses following Homeplus’ entry into corporate rehabilitation.
On March 18, during an inquiry session at the National Assembly, Shinyoung Securities President Geum Jeong-ho criticized Homeplus for applying for rehabilitation just one business day after its credit rating downgrade, without implementing any self-rescue measures, calling it "an unprecedented case."
In response to a question about whether this could be seen as a “responsibility-evading surprise rehabilitation filing,” Geum said, “It’s not for me to judge, but those in the capital markets may view it that way.”
A Homeplus store in Seoul, March 20 / Yonhap
Meanwhile, a domestically listed company already filed fraud charges against Michael ByungJu Kim, chairman of MBK Partners, and Kim Kwang-il, a partner at MBK Partners and co-CEO of Homeplus, as well as Homeplus co-CEO Joh Ju-yeon, accusing them of knowing in advance about the credit rating downgrade but concealing it while issuing short-term bonds.
According to the complaint, the company purchased a total of 13.8 billion won ($9.4 million) worth of Homeplus’ electronic short-term bonds and ABSTBs between Jan. 10 and Feb. 28.
The company stated in the complaint that Homeplus management was fully aware of the deterioration in the firm's financial condition and the risk that payments for commercial paper, electronic short-term bonds and ABSTBs could be suspended or defaulted.
"Homeplus did not inform securities firms, prospective purchasing companies or individuals about these risks, despite having plans to apply for rehabilitation in the near future," the complaint read.