MBK faces renewed scrutiny over Homeplus fiasco under new financial leadership
A Homeplus store in Seoul, Sunday / Yonhap
The Financial Supervisory Service (FSS) has launched formal disciplinary proceedings against MBK Partners, the majority owner of Homeplus, as part of an expanded probe following the appointment of new Gov. Lee Chan-jin on Aug. 14, industry and government officials said Monday.
Homeplus filed for corporate rehabilitation with the Seoul Bankruptcy Court on March 4 after a credit rating downgrade, drawing criticism from the private equity firm for recklessly placing the nation’s second-largest supermarket chain under corporate rehabilitation after acquiring it through a leveraged buyout.
The FSS recently sent an inspection opinion to MBK, detailing findings, proposed sanctions and legal rationale based on its review, marking the formal start of disciplinary proceedings. This followed a March on-site inspection of the company by the watchdog.
Prosecutors have already been investigating allegations that Homeplus raised 600 billion won ($430 million) through short-term bonds while concealing its corporate rehabilitation plans from investors. Thus, the ongoing FSS proceedings are believed to focus on MBK’s management of redeemable convertible preferred shares (RCPS) issued during the Homeplus acquisition.
The FSS is examining whether changes to the redemption terms of Homeplus’ RCPS during its credit rating downgrade may have harmed investors, including the National Pension Service (NPS), which invested 582.6 billion won.
Last Wednesday, the FSS and Financial Services Commission (FSC) dispatched a large team to MBK’s headquarters in Seoul for an on-site inspection.
If investor interests are found to have been affected, the actions could be classified as unfair business practices under the Capital Markets Act, triggering severe sanctions.
Lee Eog-weon, the nominee for FSC chairman, has also increased pressure on MBK.
In written responses to the National Assembly ahead of his confirmation hearing slated for Tuesday, he said some recent private equity practices fall short of market and public standards, apparently targeting MBK.
“Reforms are needed to curb private equity funds’ short-term, profit-focused control of companies to ensure the sustainable growth of the market,” he wrote. “We will assess the strengths and weaknesses of private equity and pursue regulatory measures to rebuild market confidence.”