Four Banks Hold ARBLs Worth 30 Billion KRW
Concerns Over Repayment Demands Lead to Waived Overdue Interest and New Loans
Shinhan Bank Sent Official Notice to Branches on the 10th
The banking sector is stepping up financial support to ease the burden of accounts receivable-backed loans (ARBL) for Homeplus partner companies (suppliers). This comes amid concerns that partner companies may face repayment pressure if Homeplus fails to repay ARBLs maturing within 30 to 60 days. The total ARBL amount extended by banks to Homeplus partners is around 30 billion KRW.
According to the financial sector on the 11th, Shinhan Bank sent an official notice to all branches the day before, outlining financial support measures for Homeplus partners, including ARBL assistance. Regarding ARBLs, the bank will waive overdue interest. The notice also includes support for new loans aimed at repaying ARBLs. A Shinhan Bank official said, "The maturity date is set by Homeplus and its partners, so the bank cannot extend it arbitrarily," adding, "Instead, we are trying our best to help so that the partners do not suffer damage."
ARBL refers to a loan where the primary contractor pays the supplier with accounts receivable instead of cash, and the supplier uses those receivables as collateral to obtain a loan from the bank. The maturity is usually 30 to 60 days, and when it matures, banks first request repayment from the primary contractor. However, if the primary contractor does not repay, the bank demands repayment from the supplier. This is because ARBL loans generally include recourse rights allowing the bank to demand repayment from the supplier instead of the primary contractor.
Concerns have been consistently raised that this could impose a burden on Homeplus partners. If Homeplus repays as planned, the issue is resolved, but with corporate rehabilitation procedures still unresolved and ARBL maturities arriving, partners have had to bear the repayment burden themselves. In fact, Shinhan Bank and Industrial Bank of Korea reportedly applied recourse rights to ARBLs that matured and demanded repayment. Legally, if banks do not exercise their repayment claims, their rights to the receivables disappear, so banks were compelled to make such demands.
Other banks holding Homeplus partners’ ARBLs are also considering support measures. KB Kookmin Bank stated, "Currently, there are no ARBL delinquencies, so recourse rights have not been exercised," adding, "We are currently reviewing detailed conditions, including whether to include ARBLs in financial support." Woori Bank believes that support for ARBLs is possible through measures such as waiving overdue interest already implemented for small and medium-sized enterprises.
However, new loans for the purpose of repaying ARBLs were not included in this financial support plan. A Woori Bank official explained, "Since ARBLs must primarily be repaid by Homeplus, it does not align with loan support for partner companies." The scale of ARBLs extended by Woori Bank is approximately 2 billion KRW, and since Homeplus has promised to repay trade receivables, it is believed that Homeplus’s liquidity is sufficient for repayment.
With Homeplus entering court receivership, new ARBL agreements will be suspended. The banking sector has decided to support partner companies by providing new loans up to 500 million KRW, deferring installment repayments, lowering interest rates, and extending maturities to ensure they do not face liquidity difficulties.
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