MBK, Facing Liquidation Crisis Amid Homeplus: Sanction Risks Materializing?

*This content was translated by AI.

Homeplus, MBK’s largest portfolio company, has ultimately received a court ruling to dismiss reorganization proceedings, raising the possibility of liquidation. Meanwhile, the Financial Supervisory Service (FSS) has decided to maintain its decision to impose severe disciplinary measures on MBK Partners (MBK), including suspension from duty.

Consequently, there are even predictions that this will place significant strain on MBK’s fundraising efforts.

In particular, if the sanctions by the Financial Services Commission (FSC) are finalized, MBK could face adverse consequences such as being negatively evaluated in future new investment assessments by domestic institutional investors and potentially having its selection process as a trustee for the National Pension Service halted or revoked.

According to the financial investment industry, the FSS Sanctions Deliberation Committee decided on the 2nd to maintain the severe disciplinary measures against MBK, including suspension from duty, in line with the original proposal. This measure will be finalized after undergoing deliberations by the Securities and Futures Committee and the Financial Services Commission.

According to media reports, it is understood that the FSS determined that MBK committed violations of the Capital Markets Act related to unsound business practices and breaches of internal controls.

It is reported that the FSS concluded that when MBK modified the terms of the redeemable convertible preferred shares (RCPS) invested in Homeplus, it failed to adequately consider the interests of investors such as the National Pension Service and instead altered the conditions to favor Homeplus, thereby violating the obligation of general partners (GPs) under the Capital Markets Act to comply with business conduct standards.

Under the Capital Markets Act, the level of sanctions against GPs by institutional investors follows this order: warning → caution → suspension from duty within six months → removal request. Suspension from duty is among the highest levels of disciplinary action, excluding the removal request.

In response, MBK stated that the RCPS invested in by the National Pension Service and the modified Homeplus RCPS are separate securities, and that the adjustment was a reasonable operational judgment aimed at preserving corporate valuation and protecting investor interests. The company also indicated it will continue to provide explanations in the future.

If these sanctions are finalized, it is expected to place considerable strain on MBK’s fundraising efforts targeting institutional investors. In particular, regulations stipulate that the National Pension Service may halt or revoke the selection of a trustee for companies that have received disciplinary actions beyond warnings from institutional investors due to violations of laws and regulations in the criteria for selecting and managing private equity trustees. Consequently, some analysts suggest there is a possibility that the National Pension Service’s internal review could lead to the suspension or revocation of MBK’s selection as a trustee.

Furthermore, industry experts note that major pension funds and mutual aid associations evaluate not only fund managers’ operational capabilities but also their internal controls and reputation risks. Thus, the final sanction outcome could become a significant burden for MBK in establishing new funds and attracting investments.

Amid this situation, Homeplus, MBK’s largest investment target, faces an increased risk of liquidation as its reorganization proceedings have been dismissed. The Seoul Bankruptcy Court ruled on the 3rd to dismiss Homeplus’ reorganization proceedings. For the reorganization process to resume, Homeplus must secure operating funds within the period set by the court and file an immediate appeal. However, since MBK had previously engaged in negotiations with Meritz until the dismissal of reorganization proceedings, it remains uncertain whether actual funding can be secured.

Meritz has stated its intention to provide approximately 100 billion won based on guarantees from MBK Chairman Kim Byung-joo, while MBK insists that since it has already provided guarantees for 100 billion won, Meritz must additionally disburse the remaining 100 billion won, totaling 200 billion won in full support.

As this situation continues, not only is the normalization of Homeplus at risk, but MBK’s reputation risks are also expanding. In the political sphere, concerns regarding damages to workers, supplier companies, and creditors related to the Homeplus crisis continue to be raised. With severe disciplinary procedures by financial authorities underway, there are predictions that this could also influence investment decisions by institutional investors.

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*This content was translated by AI.