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Investor losses on Homeplus likely to grow as debt estimate balloons to $413M

Published: 10 Mar. 2025, 18:56

CHO YONG-JUN
[email protected]

A Homeplus branch in Seoul displays its discounted items on March 9. [YONHAP]

Investor losses related to Homeplus are expected to grow as it was found that parent company MBK Partners was issuing commercial paper right before the retail chain filed for court receivership on March 4, bringing the total of financial bonds held by individuals and corporations to an estimated 600 billion won ($413 million).

Homeplus, according to the financial investment industry on Sunday, issued 28 billion won in commercial paper and 56.5 billion won in short-term bonds from Jan. 1 to March 4, right before the company announced that it was entering corporate rehabilitation. Investors will not be able to retrieve their principal for a while as a firm's debt is frozen during court-led rehabilitation.

As the hypermarket said it still has 188 billion won in unpaid commercial paper and electronic short-term bonds on top of an asset-backed short-term bond worth 400 billion won, Homeplus is estimated to have 600 billion won in debt — with most sold to individual investors.

“Commercial paper or electronic short-term bonds of corporations with a BBB financial rating [or equivalent like Homeplus] have high interest rates of six to seven percent as well as short maturity and are therefore mostly sold to retail investors,” a source in the securities industry said. “Institutions are not into such bonds due to the high credit risks.”

Another source in the field commented that Homeplus’s commercial paper was the “most accessible” among BBB-rated firms.

“Commercial paper, as they are also issued through private placement, are mostly classified as high-yield funds and may cause indirect damage to individuals who have signed up for such funds.”

The securities industry estimated that 300 million won worth of the company's asset-backed short-term bonds were sold to individuals.

Homeplus released a statement Sunday, explaining that the company’s asset-backed short-term bonds and commercial paper were sold by securities firms, not by Homeplus.

“Homeplus was aware of the fact that such bonds were sold to retail investors only after it applied for the rehabilitation procedure,” the retailer said Sunday. “Homeplus and MBK Partners did not expect the credit ratings drop,” referring to a slash to its commercial paper to A3- last week. In 2023, the company received a BBB long-term credit rating from Korea Ratings.

The hypermarket chain's prospects have grown even more glum, with both bonds and commercial paper hit with a D rating the day it filed for rehabilitation.

Securities industry insiders, however, doubted the claim of ignorance, as firms negotiate with securities when issuing financial bonds, including how many they intend to sell to individuals.

“Credit rating firms also ask for additional data and ask companies for planned measures ahead of an evaluation,” a source in the industry said.

Individual investors will be able to file a complaint with the Financial Supervisory Service or sue MBK Partners once Homeplus’s rehabilitation plans are confirmed, which is expected to impact the market even further. Securities may also be blamed for selling commercial papers to individuals.

“The improper selling of bonds will be inspected once the loss is confirmed,” a source related to the financial authorities said.

BY LEE BYUNG-JUN, JEONG JIN-HO [[email protected]]