Lime Sellers' First Discussion on 'Bad Bank'... "Decision on Participation by the 22nd"

[Asia Economy Reporter Koh Hyung-kwang] Last year, the sales companies of Lime Asset Management funds, whose redemptions were suspended, began discussions to establish a so-called 'bad bank' to handle the non-performing funds. A bad bank is a temporary institution operated to manage the non-performing assets of financial companies. The recovery of Lime's non-performing funds will be entrusted to the newly established bad bank, and Lime Asset Management is expected to be effectively phased out from the market.

On the 20th, according to financial authorities and the financial investment industry, representatives from 19 sales companies of Lime Asset Management funds, including banks and securities firms, held a meeting at the Financial Supervisory Service Training Institute in Tongui-dong, Jongno-gu, Seoul, to discuss the establishment of the bad bank. The attendees explained the previously held discussions on the bad bank establishment, which were mainly among large sales companies, to the remaining smaller securities firms and other sales companies, and discussed the establishment plan and the scale of investment. A securities firm official said, "As it was the first meeting, we shared the purpose of establishing the bad bank and discussed the direction," adding, "The scale of investment, specific establishment methods, and timing have not yet been decided."

The sales companies plan to decide by the 22nd whether to participate in the establishment of the bad bank and, as early as this week, hold another meeting to discuss each company's investment amount. The newly established bad bank will be responsible for selling the assets contained in Lime's redemption-suspended funds to raise money to return to investors. Sales companies such as Woori Bank, Shinhan Financial Investment, Shinhan Bank, Daishin Securities, and KB Securities plan to determine their investment amounts based on their sales volume. It is known that financial companies with larger balances of Lime funds with suspended redemptions will contribute more to the bad bank. Woori Bank, Shinhan Financial Investment, and Shinhan Bank account for more than 60% of the total sales amount.

Once the bad bank is established, it is expected to acquire four parent funds in their entirety: Lime's trade finance fund (Pluto TF-1), mezzanine fund (Tethys 2), private bond fund (Pluto FI D-1), and Credit Insured Fund (CI) No. 1. The customer money contained in the 173 sub-funds invested in these four parent funds amounts to 1.6679 trillion won. The new management company will be composed of employees selected by the Lime fund sales companies.

Discussions on establishing the bad bank management company appear to have been triggered by the 'Star Mobility incident.' Despite the suspension of redemptions, it was detected that nearly 20 billion won from the fund flowed to Kim Bong-hyun, former chairman of Star Mobility, who was identified as Lime's 'money source.' Sales companies began considering the establishment of the bad bank since January, when it became known that some funds from the redemption-suspended funds were transferred to Star Mobility.