Rhyme Trade Finance Fund Due Diligence Ends This Month...High Risk of Total Loss

[Asia Economy Reporter Ji-hwan Park] The due diligence results for the 'Pluto TF No.1' fund (Trade Finance Fund), one of Lime Asset Management's private equity funds with suspended redemptions worth about 1.6 trillion KRW, are expected to be completed by the end of this month. The financial investment industry views the Trade Finance Fund as highly likely to incur a total loss.

According to the financial investment industry on the 29th, Samil Accounting Corporation is conducting due diligence on the Trade Finance Fund, aiming to complete it by the 31st of this month. Even if there is some delay due to the impact of the novel coronavirus (COVID-19), the due diligence is expected to finish by early April.

The Trade Finance Fund is a fund investing in promissory notes (P-notes) with a total size of about 240 billion KRW. Samil Accounting Corporation has been conducting due diligence on this fund since November last year. The due diligence results for the 'Pluto FI D-1' (Pluto) and 'Tetis No.2' (Tetis) funds, which started simultaneously, were already released last month. However, the Trade Finance Fund's due diligence was delayed because most of its assets are bonds of foreign companies.

Once Samil Accounting Corporation notifies Lime Asset Management of the due diligence results analyzing the recoverability of investments by asset type, Lime Asset Management will adjust the valuation prices of each asset based on the due diligence results and notify the expected profit and loss to the distributors. Although the due diligence results have not yet been released, the financial investment industry expects the Trade Finance Fund to incur a total loss.

The Trade Finance Fund invested 500 million USD in five overseas trade finance funds. Among them, problems arose in the International Investment Group (IIG) fund. IIG was sanctioned by U.S. financial authorities in November last year with deregistration and asset freezing of the fund due to securities fraud allegations.

In January last year, Lime Asset Management disposed of the investment fund to a Singapore-based special purpose company (SPC) at book value and received promissory notes (P-notes) worth 500 million USD.

If losses exceed 200 million USD in the Trade Finance Fund, investors will suffer a total loss. Since the IIG fund has already entered the official liquidation phase, a principal loss of 100 million USD has occurred among the received promissory notes. The remaining notes are subject to conditions of receiving fixed interest and principal over 3 to 5 years, making early repayment of the remaining principal difficult.