Sold to Koramco Asset Management Private Equity Fund for 114 billion KRW
Profitable logistics company 'Foodnuri' faces capital erosion and audit opinion rejection
Spread of failing logistics centers in Gyeonggi Province
As logistics centers deteriorate due to oversupply, one of the distressed logistics centers in Gyeonggi Province, the ‘Foodnuri Icheon Logistics Center,’ has been acquired by a fund managed by Koramco Asset Management. Foodnuri, the logistics company that operated the center, fell into a capital deficit due to continued losses and is currently reported to be unable to properly repay its trade debts.
According to the investment banking (IB) industry on the 13th, Koramco Asset Management, a real estate alternative investment specialist, set up a private equity fund called ‘Koramco General Private Real Estate Investment Trust No. 155’ and purchased the Foodnuri Icheon Logistics Center located in Jangam-ri, Majang-myeon, Icheon-si, Gyeonggi Province. The private equity fund has a maturity of five years. If the fund is not sold to a third party before maturity, it will continue to hold the Foodnuri logistics center.
The purchase price is reported to be approximately 114 billion KRW, about 30 billion KRW lower than the initial appraisal value of 140 billion KRW. An industry insider said, "Due to oversupply of logistics centers in Gyeonggi Province, values have declined, causing the price of the Foodnuri Icheon Logistics Center to fall below the appraisal value," adding, "The transaction price is roughly at the book value recorded in Foodnuri’s financial statements."
Koramco Asset Management financed most of the logistics center purchase price through borrowings. They secured a collateral loan of 72 billion KRW using the logistics center as collateral and issued securitized bonds worth 32 billion KRW backed by Class 1 beneficiary certificates of the fund to raise acquisition funds. The actual owner of the 10 billion KRW equity investment has not been identified.
Kiwoom Securities provided credit support guaranteeing the principal and interest repayment of the securitized bonds during the securitization of the 32 billion KRW Class 1 beneficiary certificates. If the SPC fails to properly repay the bond principal and interest, Kiwoom Securities agreed to support the funds necessary for loan repayment or purchase the fund beneficiary certificates held by the SPC.
Foodnuri, which previously owned this logistics center, was a profitable logistics company with annual sales exceeding 110 billion KRW until 2020. It was a specialized logistics company delivering food ingredients twice daily nationwide to about 4,000 franchise stores and approximately 3,000 Baemin Sanghoe locations.
However, large-scale investments made to respond to the surge in logistics demand during the COVID-19 pandemic became a burden. In 2021, Foodnuri borrowed funds from financial institutions to build a large-scale logistics center of about 33,000 pyeong (approximately 109,000 square meters) in Icheon, but faced large losses due to vacancies and deteriorating operations.
Due to poor business performance caused by vacancies in the logistics center and interest burdens on borrowings, Foodnuri recorded net losses of 20 billion KRW in 2021 and 17.6 billion KRW in 2022. Accumulated unaddressed deficits led to a capital deficit status as of the end of 2022. In 2023, the external auditor for Foodnuri, Jiam Accounting Firm, issued a ‘disclaimer of opinion’ stating that it did not receive sufficient materials necessary for the audit.
The proceeds from the sale of the logistics center are expected to be used to pay off debts. As of the end of 2022, Foodnuri had borrowed more than 90 billion KRW in short- and long-term loans from banks, capital companies, and savings banks. An industry insider said, "Foodnuri is currently in a de facto bankruptcy state, unable to properly repay a significant amount of trade payables."
An IB industry insider commented, "The impact of oversupply of logistics centers in Gyeonggi Province is severe," and predicted, "Until the supply and demand situation of logistics centers improves, the distress of logistics center investors will continue to accumulate."
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