MBK apologizes over Homeplus corporate rehabilitation

A Homeplus store in Seoul, Aug. 31 / Yonhap

MBK Partners issued an official apology over Homeplus’ corporate rehabilitation, Wednesday, expressing deep regret for “causing significant concern and disappointment to the public due to our shortcomings in judgment and management as a major shareholder over the past 10 years.”

MBK, a private equity firm, owns Homeplus, Korea’s second-largest supermarket chain.

“We sincerely regret that Homeplus has reached the critical stage of corporate rehabilitation, causing uncertainty and hardship for numerous employees, partner companies, creditors and customers,” the firm said in a written apology.

Homeplus filed for corporate rehabilitation with the Seoul Bankruptcy Court on March 4, following a credit rating downgrade. The move has drawn strong criticism toward MBK, with many accusing the firm of recklessly placing one of the country’s largest supermarket chains into corporate rehabilitation after acquiring it through a leveraged buyout.

Prosecutors have also been investigating allegations that Homeplus raised 600 billion won ($430 million) through short-term bonds while concealing its corporate rehabilitation plans from investors, while the Financial Supervisory Service has launched formal disciplinary proceedings against MBK as part of an expanded probe.

Amid growing controversy, MBK has taken steps such as canceling 2.5 trillion won worth of Homeplus common shares without compensation and providing a total of 300 billion won in financial support for the beleaguered retailer.

Additionally, MBK pledged to help ease the financial burden on the potential acquirer of Homeplus during the M&A process ahead of rehabilitation proceedings, stating it would donate up to 200 billion won from a portion of its future operating profits.

The firm also committed to doing its utmost to ensure that the National Pension Service (NPS) can recover its investment in redeemable convertible preferred shares (RCPS) related to Homeplus.

According to MBK, the NPS invested a total of 582.6 billion won in Homeplus RCPS through a dedicated project fund. Over the past decade, 313.1 billion won has been recovered through dividends and other returns, leaving 269.6 billion won still outstanding, meaning the service has already recouped more than half of its RCPS investment.

“MBK earned only 100 million won in fees from the deal, a minimal amount compared with the size of NPS’ RCPS investment,” an MBK official said.

The official added that when MBK acquired Homeplus in 2015, around 2.1 trillion won in common shares was invested through separate project funds of global pension funds, emphasizing that this was not part of MBK’s blind fund.

Separately, the NPS also committed capital to MBK’s blind fund III-2, a type of fund in which investment targets are not predetermined. MBK used this fund to invest in more than seven companies, including Homeplus common shares, Orange Life, Doosan Machine Tools and APEX Logistics.

MBK said that the NPS invested a total of 157.5 billion won, including 29.5 billion won in Homeplus common shares, and has so far recovered 340 billion won, generating roughly 2.2 times the original investment.

As MBK recently decided to cancel 2.5 trillion won worth of Homeplus common shares without compensation, the NPS’ 29.5 billion won investment in Homeplus common stock was entirely written off.

Nevertheless, due to strong returns from other portfolio companies, the NPS’ overall investment in MBK’s blind fund III-2 continues to deliver more than twice its original capital.