Latest news with #LeeBok-hyun
Korea Herald
09-05-2025
- Business
- Korea Herald
PEF-backed Lotte Insurance faces regulatory heat over bond redemption
Lotte Insurance, backed by private equity firm JKL Partners, is under intensified regulatory scrutiny after South Korea's financial watchdog blocked its attempt to redeem 90 billion won ($64.2 million) in subordinated bonds ahead of maturity. Financial Supervisory Service Governor Lee Bok-hyun on Thursday issued a sharp rebuke, saying he was 'gravely concerned' about the company's push to exercise the call option despite falling short of financial stability requirements. 'The company's K-ICS risk-based capital ratio has deteriorated and does not meet the conditions for early redemption,' Lee said during a financial stability meeting. 'We will take necessary actions in strict compliance with regulations.' The warning followed Lotte Insurance's formal statement earlier that day confirming it had triggered the call option and initiated the redemption process. 'We have secured sufficient funds for redemption and formally exercised the call option on Thursday,' the company said, adding that the move was aimed at protecting investors and maintaining capital market stability. That stance puts the insurer at odds with regulators, who have repeatedly blocked its efforts to issue new subordinated debt and proceed with the early redemption, citing inadequate solvency. Capital concerns stall payout attempt Under Korean insurance regulations, companies must maintain a post-redemption K-ICS ratio above 150 percent to qualify for a call. Lotte Insurance's ratio stood at 155 percent at the end of 2024, but is expected to fall below the threshold if the bonds are redeemed. In February, Lotte Insurance sought to issue 100 billion won in subordinated bonds, completing investor demand forecasting and book-building. The offering was pulled after the FSS intervened. The stalemate has left Lotte Insurance cornered, under pressure from bondholders seeking redemption. The 90 billion won in subordinated bonds, issued in May 2020 with a 10-year maturity, are typically redeemed after five years with investor consent and regulatory approval. The redemption process is overseen by the Korea Securities Depository and requires FSS approval. A company official denied the move was meant to defy regulators, characterizing it as an effort to uphold investor trust. 'At this point, we have no other choice. The call date was triggered on Thursday, and from that moment, significant interest begins to accrue. The risk of not repaying is too great,' the official told The Korea Herald, adding that the firm is in talks with regulators to find a solution. The FSS is pressing Lotte Insurance to shore up its capital base before proceeding. Insurers with a K-ICS ratio below 150 percent may still redeem debt early, but only by improving solvency through methods such as recapitalization or refinancing. Yet, those options appear limited for Lotte Insurance. Raising capital takes time, and more critically, JKL — as a financial investor — has limited appetite to inject fresh funds. The dispute also complicates JKL's exit strategy. The Seoul-based firm acquired a 53 percent stake in Lotte Insurance from Lotte Group for 370 billion won in 2019, followed by a 360 billion won capital infusion, boosting its holding to 77 percent. JKL has been actively pursuing a sale. After a failed deal with Woori Financial Group, it switched to a rolling sale structure in July 2024, leaving the company open for acquisition without a deadline or preferred bidder. Valuation remains a major hurdle. JKL is reportedly seeking 2 trillion won, but market expectations hover closer to 1 trillion won or lower, reflecting the insurer's weak fundamentals. Lotte Insurance's K-ICS ratio is among the industry's lowest and turns negative when measured against common equity. The only other Korean insurer with negative capital adequacy is MG Non-Life Insurance, now facing insolvency after repeated failed sale attempts. While the industry expects Lotte Insurance will likely push ahead with the call option, the regulatory standoff is likely to complicate fundraising for other insurers and dampen activity in Korea's M&A market. Observers say the scrutiny has intensified because the firm is PE-owned — a structure often criticized for prioritizing short-term exits over long-term stability. The controversy also comes amid public backlash over MBK Partners' troubled stewardship of Homeplus, which entered court-led rehabilitation after a ratings collapse under MBK's watch. The FSS has signaled it will examine whether Lotte Insurance's ownership structure played a role in its decision-making. 'Unlike other insurers, Lotte Insurance's majority shareholder is a financial investor whose focus is on maximizing short-term returns rather than ensuring long-term stability,' said FSS Senior Deputy Governor Lee Se-hoon. 'Given the recent controversy surrounding MBK, the broader issue of private equity ownership will also be part of our review.'
Korea Herald
10-04-2025
- Business
- Korea Herald
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.
Korea Herald
08-04-2025
- Business
- Korea Herald
Financial watchdog chief calls for measures for market stability, financial prudence
The chief of South Korea's financial watchdog said Tuesday the country needs to map out all feasible measures for the market stability and prudence of financial institutions amid increased volatility. In a meeting with staff, Lee Bok-hyun, governor of the Financial Supervisory Service, said the United States' reciprocal tariffs are feared to cause a global trade war, which will lead to an economic slump and further stir market volatility. "We need to analyze the impacts from the looming tariff war and take measures in advance to minimize any fallout," he said. The FSS chief also called for steps to thoroughly monitor the capital market and prudence of banks. On Monday, the benchmark Korea Composite Stock Price Index (KOSPI) plunged by more than 5.5 percent, marking a fourth consecutive session of losses as investors were shaken by concerns over an escalating global trade war, exacerbated by reciprocal tariffs imposed by the US. The South Korean won also experienced its sharpest decline against the US dollar since the COVID-19 pandemic. (Yonhap)
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
02-04-2025
- Business
- Korea Herald
Financial watchdog chief again calls for revision of Commercial Act
The chief of the country's financial watchdog on Wednesday reiterated the need for the proposed revision of the Commercial Act, insisting it will help protect shareholders and also support the advancement of the capital market. In a radio interview, Lee Bok-hyun, governor of the Financial Supervisory Service, said he had offered to resign, but was not accepted, after acting President Han Duck-soo vetoed the opposition-led bill on expanding the fiduciary duty of corporate directors from solely the "company" to both the "company and its shareholders." The amendment to the Commercial Act, which was passed by the opposition-controlled National Assembly last month, was vetoed by Han at a Cabinet meeting on Tuesday and will be sent back to parliament for a revote. Lee had stressed that the bill should not be vetoed as it would help make the country's capital market healthier and fairer in the long run. (Yonhap)
