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Korea Herald
28-04-2025
- Business
- Korea Herald
Homeplus, MBK Partners HQs raided over controversial short-term debt sale
Prosecutors carried out a search and seizure operation at the headquarters of Korea's second-largest supermarket chain, Homeplus, and its largest shareholder, private equity firm MBK Partners, on Monday, as part of an investigation into alleged fraud and violations of the Capital Market Act. The Seoul Central District Prosecutors' Office announced that officials were dispatched to secure financial records in order to trace the flow of funds as Homeplus' financial health began to deteriorate after MBK Partners acquired the supermarket in 2015, culminating in losses of approximately 200 billion won ($138 million) in 2023. The retailer decided to apply to enter a rehabilitation program at the Seoul Bankruptcy Court on March 4. The search and seizure operation was conducted on suspicion of soliciting bond investments while deceiving investors, according to the prosecution. Prosecutors suspect that both Homeplus and its major shareholder, MBK Partners, had advance knowledge of the retailer's credit rating downgrade, but they continued to issue a large amount of short-term bonds and abruptly filed for rehabilitation, transferring the losses to investors and putting some 19,000 employees, 6,000 suppliers and partners in jeopardy. On Feb. 28, the Korea Investors Service downgraded Homeplus' credit rating from A3 to A3-, citing weak profitability, excessive debt and increasing uncertainty about the company's mid- to long-term competitiveness. Investigators believe Homeplus and MBK were informed about the rating downgrade at least by Feb. 25, when they received a preliminary notice from the credit agency. Despite knowing the company's rating was likely to decline, Homeplus issued asset-backed short-term bonds worth 82.9 billion won through Shinyoung Securities on Feb. 25. The prosecution reportedly claimed that selling bonds to investors in anticipation of corporate rehabilitation could be considered fraud, as such rehabilitation puts a hold on the financial procedures related to the debt, including interest payments. Four stock brokerage houses, including Shinyoung Securities, filed criminal complaints against Homeplus executives, alleging fraud for selling bonds while being aware of the rating downgrade and the upcoming corporate rehabilitation on April 1. The Financial Supervisory Service previously announced in a briefing on April 24 that it had secured concrete evidence that Homeplus and MBK Partners had been aware of the downgrade and planned to file for corporate rehabilitation for quite some time. South Korea's financial watchdog conducted an inspection into potential irregularities in the Homeplus scandal starting in mid-March, transferring records related to the controversial short-term debt sale to the prosecution on April 21. Prosecutors are reportedly scheduled to investigate MBK Partners Chairman Kim Byung-joo, MBK Partners Vice Chairman and Homeplus co-CEO Kim Kwang-il, and Homeplus President and co-CEO Joh Joo-yun as suspects. Detailed information about the investigation process has yet to be announced.
Korea Herald
02-04-2025
- Business
- Korea Herald
'What would Yoon do?': FSS chief defiant over vetoed minority shareholder bill
Lee Bok-hyun, the governor of the Financial Supervisory Service, said on Wednesday that he had tendered his resignation in protest against the acting president's veto of a bill led by the opposition, which aimed to hold company directors accountable for harming general shareholders through their boardroom decisions. However, the chairman of the Financial Services Commission rejected his resignation offer. Lee, whose term ends in June, has been a strong advocate for amending the Commercial Act to broaden the fiduciary duties of directors to encompass both the company and its shareholders. He had previously promised to stake his position on the fate of this bill. Following the National Assembly's approval of the amendment on March 13, the head of the FSS repeatedly emphasized the need for its implementation. Meanwhile, the government appears to favor revising the Capital Markets Act instead -- a measure seen as a watered-down alternative to the main opposition party's proposal. 'I recently offered my resignation to the chairman of the Financial Services Commission, but the Deputy Prime Minsister and the Governor of the Bank of Korea persuaded me to reconsider,' Lee explained during a Wednesday morning radio interview. He expressed concern over the vetoed Commercial Act revision, saying that sending the same version of the bill back to parliament for a revote would undermine efforts to enhance shareholder value. 'Had President Yoon Suk Yeol been in office, I believe he would not have exercised his veto,' Lee said. The Constitutional Court will deliver its ruling on the president's impeachment over his short-lived martial law attempt on Friday. The main opposition Democratic Party of Korea anticipates that revising the Commercial Act to better align corporate and shareholder interests will help address the so-called "Korea discount," the persistent undervaluation of the country's equity market. Lawmakers of the ruling People Power Party asserted that the amendment would delay corporate decision-making and exacerbate legal risks. In response, the government has proposed amending the Capital Markets Act to include measures to safeguard shareholders during mergers, spin-offs and other significant business transactions. If amended, the Commercial Act would affect some 1.02 million companies, including unlisted firms, while the revised Capital Market Act would cover some 2,400 listed companies. On Tuesday, acting President Han Duck-soo exercised his veto power over the amendment to the Commercial Act, returning it to the National Assembly for further consideration. While agreeing with the general intent of the bill, the acting president emphasized its potentially significant impact on the business environment and the competitiveness of both large and small companies. 'I concluded that there is a need to explore alternative solutions to minimize side effects through more thorough discussions and serious reflection, and I intend to call for the National Assembly's reconsideration,' he said.
Korea Herald
14-02-2025
- Business
- Korea Herald
Choi calls for thorough preparation ahead of stock short selling resumption
Acting President Choi Sang-mok on Friday ordered thorough preparations for the resumption of stock short selling next month, pledging sufficient communication with market participants. South Korea imposed a temporary ban on stock short selling in November 2023 after uncovering a series of naked short selling violations involving several global investment banks. The practice is set to resume on March 31. During a regular economic meeting attended by the Bank of Korea governor, and the heads of the Financial Services Commission and the Financial Supervisory Service, Choi emphasized the need for "sufficient communication with the market to ensure a smooth transition." He also urged officials to thoroughly implement follow-up measures, including the development of a monitoring platform designed to detect illegal transactions. Choi also reiterated his hope for bipartisan cooperation in passing a revision to the law aimed at strengthening protection for minority shareholders. The proposed revision to the Capital Market Act requires a company's board of directors to safeguard shareholders' rights in cases of mergers and acquisitions, corporate split-offs, share swaps and asset transfers. (Yonhap)
Korea Herald
05-02-2025
- Business
- Korea Herald
Finance association chief vows to push for spot crypto ETFs
South Korea has to embrace cryptocurrency exchange-traded funds tied to cryptocurrencies to not lag behind the sharp growth of the global virtual asset market, the chief of a local finance association said Wednesday. "The global virtual asset market is likely to further growth backed by the Trump 2.0 administration's favorable stance toward the investment vehicle," Korea Financial Investment Association Chairman Seo Yoo-seok said at a press conference held at the industry body's headquarters in western Seoul on Wednesday. The association, also known as Kofia, acts as a self-regulatory organization of the local finance investment industry, representing brokerage houses and asset managers. "While the virtual asset market is projected to continue its expansion, Korea should not be left out,' he said. Spot cryptocurrency ETFs remain out of reach for South Korean investors as the country's top regulator the Financial Services Commission has announced the Capital Market Act does not allow virtual assets to be identified as underlying assets for securities. 'Spot cryptocurrency ETFs are already listed on exchanges in the US, Hong Kong, Canada and more,' Seo said. 'This year, we will discuss the institutionalization of the security token offering, and continue to request the authorities to allow the listing of virtual asset spot ETFs." Seo further highlighted the need to pursue the government's corporate value-up initiative, which calls for listed companies to enhance their corporate value and boost shareholder return. "The value-up initiative is about more than just boosting the stock prices. It is an integrated strategy that calls for the qualitative growth of the economy and the capital market," Seo said. "Kofia will continue to support the value-up program as a national agenda and for it to settle down as a culture." Seo further projected the local stock market to expand with the launch of an alternative trading system next month. Korea's first ATS named Nextrade is set to launch on March 4. 'The new ATS platform will spur market competition,' he said. 'The capital market's infrastructure will experience qualitative growth based on the diversification of traded products and competition,' he said. Seo, former CEO of the country's leading asset manager Mirae Asset Global Investments, took office as the head of Kofia in January 2023. His three-year term is set to last until the end of this year.
