MBK Partners Successfully Refinances Over 1 Trillion Won Acquisition Financing After Lotte Card Sale Falls Through

Existing Loan Repayment and Investment Recovery Purpose
Unable to Sell by Maturity Due to Price Gap with Acquisition Candidate
Considering Sale Timing by Extending Loan for 5 Years

MBK Partners, a private equity firm engaged in a management rights battle over Korea Zinc, has refinanced acquisition financing worth over 1 trillion won (management rights equity-backed loans) due to delays in the sale of Lotte Card. It is reported that the funds remaining after repaying the loans borrowed for the acquisition of Lotte Card will be used for investor fund recovery. After several failed negotiations to sell Lotte Card, the acquisition financing was extended for five years, allowing more flexibility in timing the sale.

Lotte Card Headquarters Building Exterior View

According to the investment banking (IB) industry on the 7th, Korea Retail Card Holdings (hereinafter Korea Retail) recently raised 1.077 trillion won by refinancing acquisition financing with a major domestic securities firm as the lead manager. Investor (lender group) recruitment was divided into senior, mezzanine, and junior tranches according to collateral and repayment priority. The loan maturity is five years. The interest rate is known to be around 5-6% on average. Domestic securities firms such as KB Securities mainly participated in the lender group.

Korea Retail Card Holdings is a special purpose company (SPC) established by MBK in 2019 to acquire Lotte Card. It currently holds 44,716,801 shares of Lotte Card (59.83% stake). At the time of the equity acquisition, Woori Bank, which participated in the Lotte Card acquisition consortium, held 20%, and the existing shareholder Lotte Shopping held the remaining 20%. MBK provided all its shares as collateral while refinancing this acquisition financing.

After acquiring Lotte Card, MBK attempted to sell it several times but failed to finalize the sale due to differences in price positions with potential buyers. In 2022, MBK launched a sale with global IB JP Morgan as the lead manager, with Hana Financial Group and KT emerging as acquisition candidates, but the sale fell through due to differing views on price.

After failing a full sale once, MBK recovered some funds last year by disposing of Loca Mobility, a subsidiary of Lotte Card. It sold 100% of Loca Mobility’s shares to Macquarie Asset Management for about 400 billion won. Loca Mobility is Lotte Card’s transportation card subsidiary.

MBK is also showing differences in price opinions with a major acquisition candidate, Woori Bank. When Woori Bank acquired Lotte Card with MBK in 2019, it valued the company at about 2.5 trillion won after five years. In recent price negotiations, Woori Bank proposed a corporate value in the 2 trillion won range, but negotiations reportedly broke down as MBK insisted on a price exceeding 3 trillion won.

MBK used the funds raised through refinancing Lotte Card acquisition financing to repay existing acquisition loans. At the time of acquiring Lotte Card, MBK raised acquisition financing of about 600 billion won with a five-year maturity, which recently matured. After repayment, about 400 billion won of remaining funds were used for investment recovery purposes.

An IB industry insider said, "MBK can now sell its Lotte Card shares flexibly over the next five years, the maturity period of the refinanced acquisition financing," adding, "They will continue efforts to improve corporate value, including enhancing Lotte Card’s financial structure, which has recently been pointed out as problematic."