MBK's Kim Byung-ju to appear as a National Assembly audit witness again this year… Witness nomination by the Ministry of Trade, Industry and Energy Committee

*This content was translated by AI.

It is expected that Kim Byung-ju, Chairman of MBK Partners (hereinafter MBK), may sit in the witness seat for this year's National Audit as well, following his appearance last year. After the Ministry of Trade, Industry and Energy Committee (MTIEC) applied to have Kim (Chairman) appear as a witness by consensus between ruling and opposition parties, Han Chang-min, a member of the Social Democratic Party, separately applied to have Kim (Chairman) appear as a witness before the Political Affairs Committee.

According to recent reports from political circles, the MTIEC has selected Kim (Chairman) as a witness for the National Audit of the Ministry of SMEs and Startups on the 7th. It is known that the reasons for questioning include the expenditure of emergency business stabilization funds and damages to tenant merchants resulting from the Homeplus crisis. Additionally, Han Chang-min (Rep.) separately applied to have Kim (Chairman) appear as a witness to question Homeplus's major shareholder about their responsibility.

However, although the Political Affairs Committee resolved at its plenary session on the 28th of last month to request the attendance of 314 witnesses from 45 supervised institutions, including the Financial Services Commission and the Fair Trade Commission, it failed to adopt a list of general witnesses such as business executives, delaying the final resolution.

The MTIEC called Kim (Chairman) as a witness to verify issues related to the leveraged buyout (LBO) method used when acquiring Homeplus. Along with this, it is known that the MTIEC decided to also summon Kim Gwang-il, Vice Chairman of MBK, to question responsibility for Homeplus's corporate rehabilitation and mismanagement. The side of Han (Rep.) is known to have stated its intention to comprehensively review controversies surrounding multiple portfolio companies in which MBK participated as a major shareholder, including Lotte Card and Homeplus, as well as Dlive.

This is not the first time Kim (Chairman) has been named as a National Audit witness. He first appeared as a witness at the Political Affairs Committee's National Audit on October 14 last year, bowing his head and apologizing for the Homeplus crisis and the Lotte Card information leak incident. However, while stating that he "would fulfill social responsibility," he drew a line by saying he was not involved in major decision-making regarding Homeplus's corporate rehabilitation, among others. Furthermore, although he was selected as a witness for the comprehensive National Audit of the Climate, Energy, Environment and Labor Committee on the 30th of the same month, he did not attend.

In response to this, members of the ruling coalition in the Political Affairs Committee of the National Assembly filed complaints with the Prosecution Service in February last year, accusing Kim (Chairman) and Vice Chairman Kim of perjury, and two other witnesses of failure to appear. Consequently, controversies surrounding the truthfulness of his answers at last year's National Audit and his attitude toward attendance are expected to be raised again at this year's National Audit.

At this year's National Audit, it is expected that MBK's responsibility will be strongly questioned, given that MBK's legal risks are ongoing. The Prosecution Service believes there are suspicions that Homeplus applied for rehabilitation immediately after issuing and selling asset-backed electronic short-term commercial paper (ABSTB), despite recognizing the possibility of a credit rating downgrade, causing losses to investors. Accordingly, it requested arrest warrants for four people, including Kim (Chairman), in early this year, but they were rejected by the court. However, the investigation continued, and Kim (Chairman) was summoned as a suspect to the Seoul Central District Prosecutors' Office on the 10th of last month.

Along with legal risks, controversies surrounding portfolio companies are also spreading. Lotte Card, in which Korea Retail Card Holdings, where MBK is the largest shareholder, holds a 60% stake, resolved a cash dividend of 38.2 billion won at an extraordinary board meeting on the 15th of last month. It was reported that this dividend was pushed forward at MBK's request. In response, points have been raised through media and other channels questioning whether MBK actually secured practical benefits while investors and partner companies suffered damages due to the Homeplus crisis.

Dlive, another MBK portfolio company cited as a case similar to the Homeplus crisis, recently received an order for corrective action from the Broadcasting, Media and Communications Commission (BMCC) not approving its debt ratio reduction plan and requiring resubmission within three months. It is known that some committee members emphasized the responsibility of MBK, the acquiring entity, among others, stating at the meeting that the large-scale borrowing during MBK's acquisition of Dlive in 2008 and subsequent dividends had an impact on the deterioration of its financial situation.

Amid this, the sanction procedure by financial authorities against MBK is also underway. The Financial Supervisory Service (FSS) concluded the deliberation of its Sanction Review Committee regarding MBK's investment in Homeplus in early July. The issue at stake was the modification of redemption conditions for Redeemable Convertible Preferred Shares (RCPS) used during the Homeplus acquisition process. It is known that the FSS investigated whether MBK infringed upon the interests of fund investors, including the National Pension Service, in the process of waiving its RCPS redemption rights, and whether there were unhealthy business practices and violations of internal control obligations during this process.

Although the FSS has not disclosed the specific level of sanctions, financial industry sources predict that a heavy sanction proposal, including suspension of duties for MBK and key executives, was maintained. The sanctions are scheduled to be finally confirmed after deliberation and resolution by the Securities and Futures Commission and the Financial Services Commission. MBK has stated its position that the modification of RCPS conditions was a judgment made to protect investor interests through improving Homeplus's financial structure, and that it will explain itself through legal procedures regarding the result of the sanction review.

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*This content was translated by AI.