Corporate Bank's Sold 'Lime Repo Plus 9M' Includes Bad Fund... 30 Billion KRW of Normal Fund Investment Recovered
"56% of Investment Recovered and Paid... Total Loss Rate Estimated at 20%"
[Asia Economy Reporter Kwon Haeyoung] It has been confirmed that IBK Industrial Bank of Korea, a policy bank, recently sold products incorporating Lime Asset Management's non-performing funds, which had suspended redemptions, amounting to about 60 billion KRW. Although IBK returned half of the investment amount, the remaining 30 billion KRW is tied up due to the suspension of redemptions, and investors are expected to bear the losses as principal losses are inevitable. It is also controversial that sales began just before the 'Lime scandal,' which caused significant losses to investors due to the fund manager's fund recycling and inflated returns.
According to the financial sector on the 20th, IBK sold the 'Lime Repo Plus 9M' fund worth 60 billion KRW in June to July last year. This fund was created by Korea Investment & Securities and sold by IBK in the form of a trust, incorporating the 'Lime Pluto FI D-1' fund, which was forcibly suspended from redemption last year. The fund consisted of 56% Lime Repo high-quality bonds fund and 44% problematic Lime Pluto FI D-1 fund.
An IBK official explained, "The investment in the high-quality bond fund was proactively recovered and paid to investors in December last year," adding, "Currently, the total loss rate of the fund is in the 20% range, and the funds invested in the non-performing fund will be paid to investors following the fund manager's repayment plan announcement next month."
IBK believes that half of the approximately 30 billion KRW invested in the Lime Pluto FI D-1 fund can be recovered. The loss rate of this fund is about 46%, but unlike other non-performing funds, there is no total return swap (TRS) contract with securities firms, so investors can receive the remaining amount as is. Some of the problematic Lime funds had borrowed from securities firms through TRS contracts, and since securities firms have priority claims, exercising these rights increases losses and reduces the share for general investors.
The timing of sales is also controversial. IBK started selling Lime funds much later than other sellers, at the end of June, and stopped sales within less than a month after discovering problems. In contrast, Woori Bank recognized the possibility of Lime Pluto fund's non-performance as early as March last year and judged through stress tests that a 30% loss could occur.
A financial sector official pointed out, "While other sellers reduced or stopped sales upon recognizing the possibility of non-performance, IBK, as a policy bank, started sales late and caused significant losses to investors."
Meanwhile, Lime Asset Management confirmed on the 14th that the loss rates of the suspended redemption funds Pluto FI D-1 and 'Tetis 2' were 47% and 21%, respectively. For another non-performing fund, Pluto TF-1, the asset inspection results have not yet been released, but a total loss is possible. Based on the inspection results, Lime plans to maximize the recovery of redemption fund assets and prepare a plan for the prompt resumption of redemptions by next month. The company newly appointed a professional manager to oversee redemption and management tasks upon the recommendation of sellers, and the Financial Supervisory Service (FSS) has dispatched an on-site inspection team to Lime Asset Management for close monitoring. The FSS will form a joint on-site investigation team to start fact-finding investigations in early next month to provide relief to investors.
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