Raised 130 Billion KRW by Transferring Installment Receivables and Other Assets
Unable to Issue Financial Bonds Due to Saemaeul Geumgo Crisis and PF Defaults
Responded to Loan Maturities Five Times This Year Through Asset Securitization
Reduced Operating Assets Weaken Additional Liquidity Securing Capacity
Saemaeul Geumgo secured 130 billion KRW in funds by securitizing operating assets through the capital company M Capital (formerly Hyosung Capital), which it acquired via the private equity (PE) firm ST Leaders PE. As the issuance of financial bonds, a major funding method, became difficult due to the Saemaeul Geumgo crisis and an increase in its own real estate project financing (PF) defaults, it has continued to pursue asset securitization. The capacity for fundraising continues to shrink as it sells off a large volume of operating assets externally to quickly raise liquidity.
Han Chang-seop, Vice Minister of the Ministry of the Interior and Safety, visited the Saemaeul Geumgo Gyeohigung Branch in Gyo-nam-dong, Jongno-gu, Seoul on the 6th to conduct an on-site inspection of Saemaeul Geumgo. He held a meeting with Lee Jil-nam, Chairman of the Gyo-nam-dong Geumgo, and other officials. Photo by Yoon Dong-joo doso7@
According to the investment banking (IB) industry on the 23rd, M Capital sold operating assets worth 180 billion KRW to NongHyup Bank Trust, under the management of KB Securities. KB Securities plans to issue securitized bonds to investors on the 30th, purchasing trust beneficiary certificates issued by NongHyup Bank through a special purpose company (SPC) and using these as underlying assets (collateral).
The operating assets M Capital transferred to the trust for fundraising consist of a total of 6,326 lease, loan, and installment receivables. These include leases and installment receivables related to factory equipment, automobiles, and medical devices, as well as automobile-secured loans and general loans. The principal balance of the assets was valued at 179.2 billion KRW, with a transfer price assessed at 191.3 billion KRW. The funds raised by M Capital through operating asset securitization amount to approximately 130 billion KRW.
Since the beginning of this year, M Capital has consecutively raised funds through securitization of operating assets in January, February, April, August, and September. Due to deteriorating creditworthiness making financial bond issuance difficult, asset securitization has become almost the sole funding method. Its current credit rating is A- with a 'negative' outlook.
The deterioration of assets has led to worsening creditworthiness. As of the end of June this year, the ratio of non-performing loans (NPLs) overdue by more than three months stood at 7.6% of total assets, doubling from 3.9% at the end of last year. The ratio of watch-list loans overdue between one and three months reached 20.1% of total operating assets. The proportion of loan loss reserves relative to NPLs is also below 50%, indicating a weakened loss absorption capacity.
Liquidity issues continue to be raised. As of the end of June this year, short-term borrowings with maturities under one year accounted for 64% of total borrowings of 2.3 trillion KRW. Operating assets are continuously decreasing as asset securitization is repeatedly conducted to repay maturing borrowings. An IB industry insider evaluated, "As loan maturities continue to arrive, the burden of repayment persists, and with operating assets shrinking, the capacity for additional asset securitization is also weakening."
M Capital is a credit-specialized company that started as Hyosung Finance in 1997. It changed its name to Hyosung Capital in 1999 and expanded its scale in 2007 by acquiring and merging Star Lease, a credit-specialized company, from the U.S.-based private equity firm Lone Star. In 2020, Hyosung sold it to Smart Leaders Holdings, a corporation established by ST Leaders PE with investment from Saemaeul Geumgo, and the company was renamed M Capital.
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
