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Korea's financial watchdog finds discrepancies in Homeplus' explanation

Published: 01 Apr. 2025, 16:31 Updated: 01 Apr. 2025, 18:55

SHIN HA-NEE
[email protected]

Financial Supervisory Service Senior Deputy Gov. Hahm Yong-il speaks during a press briefing on current issues, such as the ongoing investigation on MBK Partners, at the regulator's headquarters in western Seoul on April 1. [YONHAP]

Korea's financial watchdog discovered discrepancies between facts and explanations from MBK Partners — the country’s largest private equity — about the recent rehabilitation filing of Homeplus, the Financial Supervisory Service (FSS) said Tuesday.

The regulator suspects that MBK Partners may have been dishonest about when the firm became aware of the credit rating downgrade of Homeplus, which could potentially constitute fraud, as the discount retail chain issued commercial papers and short-term corporate bonds almost right before the downgrade and a subsequent rehabilitation filing on March 4.

“There has been meaningful progress in the ongoing investigation,” said FSS Senior Deputy Gov. Hahm Yong-il, who oversees capital markets and accounting regulations, during a press briefing that day in western Seoul.

“We found inconsistencies between previous explanations from MBK and Homeplus and the actual circumstances regarding when they became aware of the credit rating downgrade and the events leading up to the rehabilitation filing.”

However, as the investigation is still in progress, the FSS has yet to finalize any allegations or consider referring the case to the prosecution.

Hahm demanded MBK Partners and Homeplus take “responsible actions" to restore trust from the market and investors.

“MBK and Homeplus promised that [MBK founder] Michael ByungJu Kim would use his private funds and that they would classify Homeplus’s asset-backed securities as trade credits,” which may ensure repayment for investors, Ham said. “But the announced measures were not concrete enough, raising questions on their sincerity and effectiveness.”

Ham demanded that Homeplus and MBK Partners provide details on the amount of bonds that will be repaid and the due date for repayment.

Regardless, Homeplus reiterated its previous stance that it was unaware of the credit rating downgrade before granting the short-term bond issuance in a statement released on Tuesday afternoon.

“Regarding the issue, we will do our best to answer any questions during the FSS investigation,” Homeplus said.

Investors who bought Homeplus's short-term bond protest in front of the supermarket chain's headquarters in Gangseo District, western Seoul, on March 25. [NEWS1]

During the Tuesday briefing, the senior deputy governor also addressed the FSS’s latest demand for Hanwha Aerospace to revise its securities filing for a massive 3.6 trillion won ($2.45) rights offering plan.

“The FSS demanded Hanwha Aerospace to revise its securities filing because we found the document lacking information essential for reasonable decision-making for investors,” said Hahm.

Hahm listed multiple questions regarding the controversial rights offering, urging Hanwha to clarify why it decided to opt for the rights offering instead of other options for financing, whether it sufficiently considered the timing of the share sale and the intended purpose of the raised capital, and why Hanwha Aerospace bought shares of Hanwha Ocean right before the announcement.

Following the first full resumption of stock short-selling in five years on Monday, the senior official promised that the FSS would closely monitor the market situation for the stable operation of the newly launched naked short-selling detection system.

"We expect the new Naked Short Selling Detection System to contribute to significantly enhancing the fairness and transparency of the market," Hahm said.

"However, given that volatility could increase due to the short sale resumption coinciding with the upcoming reciprocal tariff announcement and the rising concerns of the U.S. economy slowdown — which fueled a steep decline in global stock prices — the FSS will closely monitor the market situation and manage potential risks."

BY SHIN HA-NEE [[email protected]]