MBK faces headwinds amid regulatory probes
Future course of fundraising overshadowed by series of probes into Homeplus investment
MBK Partners could face challenges in fundraising while embroiled in controversies surrounding South Korea's No. 2 hypermarket chain, as public funds turn wary due to compliance risks, according to industry sources.
Following Homeplus' application for a court-led rehabilitation, MBK has been pressured by multiple governmental bodies. MBK wholly owns the discount supermarket franchise as a portfolio company.
In March, the National Tax Service launched a tax investigation into MBK. The Korea Fair Trade Commission is also looking into suspicions of alleged internal trading between MBK, Homeplus and local card issuer Lotte Card.
The Financial Supervisory Service has been conducting an investigation into MBK to determine whether it was involved in the issuance of short-term bonds for Homeplus while simultaneously planning the court-led rehabilitation behind the scenes.
On Thursday, FSS chief Lee Bok-hyun said the regulator has uncovered "meaningful facts" in its probe. Investors also warned they plan to sue the top executives of MBK if the private equity firm does not come up with follow-up measures soon.
Industry sources believe the legal uncertainties will pile greater pressure on MBK, as the firm relies heavily on public funds for limited partners.
'Public funds are usually very concerned about compliance. Any type of noise that questions the general partner's lack of compliance can be a hurdle for the (limited partners) in making new investments. From such a perspective, the compliance risks place more pressure on MBK than the losses from investment failure,' an official from a local private equity firm said.
Similar to other big-name private equity firms here, MBK largely relies on public pension funds. The firm has been pooling money from funds in and out of Korea, such as the National Pension Service, Korean Teachers' Credit Union, Canada Pension Plan Investment Board and California Public Employees Retirement System.
Prior to the Homeplus failure, MBK failed to secure funding from public funds such as the Korea Scientists & Engineers Mutual-aid Association and another fund operated by the Korea Federation of SMEs last year. Though reasons were not specified, industry officials assume MBK's involvement in the Korea Zinc proxy fight took a toll.
In March, the NPS issued a rare statement, saying it agreed to not participate in MBK investments related to hostile takeovers. The pension giant seldomly makes official comments on individual investments.
'In February, we finalized our agreement with MBK, explicitly including a condition prohibiting participation in hostile takeovers,' the statement read.
Industry officials assume it would be difficult for MBK to secure additional funding from public funds, especially those based in Korea, until its name is fully cleared.
'MBK's (limited partners) had been aware that the Homeplus investment was going to be a failure. But the compliance risks come as a surprise. They would have to see whether the current controversies and probes will materialize into legal actions or not,' the official said.
Meanwhile, MBK asserted its fundraising of capital has been successful regardless of the controversies.
"These are regulatory probes on Homeplus, not legal investigations on our investment practice or compliance," a representative of MBK said.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Korea Herald
4 days ago
- Korea Herald
Why won likely to stall above 1,300
Widening rate gap with US, trade tensions, weak fundamentals limit further gains The Korean won has been staging a sharp rally, reaching its strongest levels in seven months in June. However, further appreciation beyond the 1,300-per-dollar threshold appears limited as economic headwinds persist. Earlier this year, the won weakening past 1,400 per dollar was considered the 'new normal.' But the local currency has since gained ground, with its average exchange rate in May standing at 1,390.7 won per dollar, dipping below 1,400 for the first time since November. On Thursday, the won closed daytime trading at 1,358.4 per dollar — its strongest level since Oct. 14. The momentum continued in after-hours trading, with the currency quoted at 1,356.5 by the close. The local foreign exchange market was closed Friday in observance of a public holiday. The recent appreciation of the Korean won has been partly fueled by renewed interest from foreign investors in the stock market, who purchased local equities worth 2.2 trillion won ($1.6 billion) following President Lee Jae-myung's election victory on Tuesday. While some market observers expect the won to strengthen further against the greenback, forecasts generally cap gains in the low 1,300 range. For instance, KB Kookmin Bank projects the won could appreciate as much as 1,330 per dollar in June. In contrast, in September, the outlook was more optimistic, with market expectations of the won strengthening toward the 1,200 level — a return to 2022 conditions, when the annual average exchange rate stood at 1,292.2 won per dollar. Expectations for the won to break below 1,300 have since moderated, as structural challenges continue to weigh on the currency, despite the easing of depreciation pressure triggered by political uncertainty. 'While the won may appreciate further in the short term, gains will likely be capped,' said Wi Jae-hyun, an analyst at NH Futures. 'Supplementary budget measures, the resolution of political uncertainty, and a rate cut-driven recovery in domestic demand are expected to provide a floor for the Korean economy. However, uncertainties in exports, stemming from US President Donald Trump's tariff policies, continue to pose a significant headwind to a growth rebound.' Another key factor limiting further appreciation is the widening interest rate gap between Korea and the United States. Following the Bank of Korea's 0.25 percentage point rate cut in May, the key interest rate differential between Korea and the US widened from 1.75 to 2 percentage points. This gap is expected to grow further, as the US Federal Reserve has signaled a continued hawkish stance to curb inflation — in part due to Trump's tariff measures — while the BOK has leaned toward a more dovish approach to support domestic growth. The divergence in monetary policy increases capital outflow pressures from Korea, as investors typically shift toward higher-yielding assets. This outflow puts downward pressure on the won. Experts caution against expecting a major rally in the local currency. 'The current level of the won reflects the country's economic fundamentals. It would not be reasonable to expect a sharp appreciation when the local economy is forecast to remain weak,' an official from the Bank of Korea said. The official added that a weaker won can play a constructive role in an economic slowdown. 'In times of economic downturn, a softer currency can help boost exports and attract foreign investment in undervalued won-denominated assets. While actively depreciating the won to spur growth should be avoided, a weak currency does serve a purpose under such conditions.'
Korea Herald
4 days ago
- Korea Herald
Why Korean won's rally hits wall at 1,300
Widening rate gap with US, trade tensions, weak fundamentals limit further gains The Korean won has been staging a sharp rally, reaching its strongest levels in seven months in June. However, further appreciation beyond the 1,300-per-dollar threshold appears limited as economic headwinds persist. Earlier this year, the won weakening past 1,400 per dollar was considered the 'new normal.' But the local currency has since gained ground, with its average exchange rate in May standing at 1,390.7 won per dollar, dipping below 1,400 for the first time since November. On Thursday, the won closed daytime trading at 1,358.4 per dollar — its strongest level since Oct. 14. The momentum continued in after-hours trading, with the currency quoted at 1,356.5 by the close. The local foreign exchange market was closed Friday in observance of a public holiday. The recent appreciation of the Korean won has been partly fueled by renewed interest from foreign investors in the stock market, who purchased local equities worth 2.2 trillion won ($1.6 billion) following President Lee Jae-myung's election victory on Tuesday. While some market observers expect the won to strengthen further against the greenback, forecasts generally cap gains in the low 1,300 range. For instance, KB Kookmin Bank projects the won could appreciate as much as 1,330 per dollar in June. In contrast, in September, the outlook was more optimistic, with market expectations of the won strengthening toward the 1,200 level — a return to 2022 conditions, when the annual average exchange rate stood at 1,292.2 won per dollar. Expectations for the won to break below 1,300 have since moderated, as structural challenges continue to weigh on the currency, despite the easing of depreciation pressure triggered by political uncertainty. 'While the won may appreciate further in the short term, gains will likely be capped,' said Wi Jae-hyun, an analyst at NH Futures. 'Supplementary budget measures, the resolution of political uncertainty, and a rate cut-driven recovery in domestic demand are expected to provide a floor for the Korean economy. However, uncertainties in exports, stemming from US President Donald Trump's tariff policies, continue to pose a significant headwind to a growth rebound.' Another key factor limiting further appreciation is the widening interest rate gap between Korea and the United States. Following the Bank of Korea's 0.25 percentage point rate cut in May, the key interest rate differential between Korea and the US widened from 1.75 to 2 percentage points. This gap is expected to grow further, as the US Federal Reserve has signaled a continued hawkish stance to curb inflation — in part due to Trump's tariff measures — while the BOK has leaned toward a more dovish approach to support domestic growth. The divergence in monetary policy increases capital outflow pressures from Korea, as investors typically shift toward higher-yielding assets. This outflow puts downward pressure on the won. Experts caution against expecting a major rally in the local currency. 'The current level of the won reflects the country's economic fundamentals. It would not be reasonable to expect a sharp appreciation when the local economy is forecast to remain weak,' an official from the Bank of Korea said. The official added that a weaker won can play a constructive role in an economic slowdown. 'In times of economic downturn, a softer currency can help boost exports and attract foreign investment in undervalued won-denominated assets. While actively depreciating the won to spur growth should be avoided, a weak currency does serve a purpose under such conditions.' silverstar@
Korea Herald
7 days ago
- Korea Herald
Lotte sets sights on global retail future at NRF Big Show
Lotte Shopping Vice Chair Kim Sang-hyun highlighted the group's global strategy and innovation efforts at NRF Big Show APAC 2025, held in Singapore from Tuesday to Thursday. The event, hosted by the National Retail Federation, a US-based retail trade association, was held for the first time in the Asia-Pacific region and drew 10,000 retail leaders, including Amazon. During a session titled 'Retail Transformation, The Lotte Story,' Kim spoke with Vipul Chawla, CEO of Singapore's FairPrice Group, about Lotte's evolving approach to customer-centered retail and digital transformation. Kim, who heads the Korean firm's retail division, introduced Lotte Mall West Lake Hanoi as a leading example of innovative customer experience. The mall, which opened in 2023, recorded over 200 billion won ($147 million) in cumulative sales within nine months and 10 million visitors within 354 days. He described it as a platform that goes beyond retail, connecting customers with culture and lifestyle. Addressing structural challenges in Korea, such as economic uncertainty and an aging population, Kim explained how Lotte is expanding into global markets and utilizing artificial intelligence-driven solutions. A key project includes the construction of an AI-powered customer fulfillment center in Busan, in partnership with Ocado, to enhance hyperpersonalized recommendations and logistics automation. Kim also introduced Lotte Mart Express, recently launched inside FairPrice's VivoCity location, as a case of successful collaboration. Looking to the next three to five years, Kim stressed the importance of creating value in customers' time and experience. 'Lotte will make a strong commitment toward global competitiveness through customer-centric and tech-driven innovation,' Kim said.
