"Was It All Planned?" Surge in Homeplus Securitization Issuance Since Last Year-End

Record-High Issuance Last Month Just Before Rehabilitation Filing

Homeplus's primary short-term financing method, the issuance of card payment-backed asset-backed securities (ABSTB; asset-backed electronic short-term bonds), has surged since the end of last year. In the month before its rehabilitation application, it recorded the highest issuance in the past two years. The market continues to suspect that Homeplus and its major shareholder MBK Partners may have been aware of the possibility of a credit rating downgrade since the end of last year.

Yonhap News

According to the monthly issuance status of Homeplus ABSTB, commercial paper (CP), and short-term bonds from 2023 to 2025 obtained on the 17th by the office of Lee In-young, a member of the National Assembly's Political Affairs Committee from the Democratic Party of Korea, Homeplus's ABSTB issuance amounted to 151.8 billion KRW last month. This is the largest monthly amount in the past two years.

Last year, Shin Young Securities' ABSTB issuance increased by about 30% compared to the previous year. Especially, the issuance amount over three months from November last year reached 360.8 billion KRW, a 35% increase compared to the same period the previous year. Additionally, the total amount of ABSTB, CP, and short-term bonds underwritten by Shin Young Securities last year increased by 42.1% compared to the previous year. The three-month period from November last year saw 494.8 billion KRW issued, a 50.6% increase from 328.5 billion KRW in the same period the previous year.

Shin Young Securities solely underwrote Homeplus's ABSTB issuance and sold them to investors and other securities firms. While CP and electronic short-term bond issuances were also underwritten by BNK Investment & Securities, Hanyang Securities, DS Investment & Securities, and Leading Investment & Securities, Shin Young Securities had the largest scale.

Currently, financial authorities are focusing on investigating whether Shin Young Securities, Homeplus, and major shareholder MBK Partners were aware of the credit rating downgrade in advance but continued issuing short-term bonds. The Financial Supervisory Service began inspections on the 13th targeting Shin Young Securities and two credit rating agencies, Korea Ratings and Korea Investors Service, and has announced plans to expand inspections to MBK Partners if necessary.

Homeplus abruptly filed for court receivership in the early hours of the 4th of this month after its short-term bond credit rating was downgraded from 'A3' to 'A3-' on the 28th of last month. Since then, Homeplus has claimed it was unaware of the credit rating downgrade that triggered this situation. However, controversy arose when it was confirmed that the Homeplus-related special purpose company (SPC) received preliminary rating results from credit rating agency staff on the afternoon of the 25th of last month, the last day it issued ABSTB.

Moreover, the market is raising suspicions that Homeplus expanded its issuance of short-term bonds such as ABSTB from the end of last year because it had already recognized the possibility of a credit rating downgrade and planned the rehabilitation application beforehand.

If it is proven that Homeplus raised funds while aware of the rating downgrade and rehabilitation plan, it could face legal penalties for fraudulent transactions, similar to the past Dongyang Group incident. The Dongyang incident was a large-scale financial damage case in 2013 when Dongyang Group intentionally concealed its financial crisis, sold large amounts of CP and corporate bonds to investors, and immediately filed for court receivership for major affiliates. At that time, Dongyang Group Chairman Hyun Jae-hyun was sentenced to seven years in prison for fraud under the Act on the Aggravated Punishment of Specific Economic Crimes and was released in 2021 after serving his term.

Accordingly, the urgent inquiry by the National Assembly's Political Affairs Committee on the 18th is expected to focus on clarifying these suspicions. Representative Lee stated, "If Homeplus requested or executed bond issuance while being aware of the possibility of a credit rating downgrade in advance, it constitutes investor deception and requires thorough investigation by financial authorities. Furthermore, since Homeplus's card purchase receivables were the underlying assets, if there is evidence that MBK and Homeplus secured inventory in advance to prepare for corporate rehabilitation, the truth must also be thoroughly investigated."

The Homeplus ABSTB Victims' Countermeasure Committee, which launched its first collective action last week, will hold an emergency meeting for victims at the National Assembly Members' Office Building on the same day to disclose cases of damage. MBK Partners, announcing Chairman Kim Byung-joo's personal fund contribution the day before, promised to "ensure smooth negotiations between all creditors, including those related to purchase receivables securitization, and Homeplus" regarding Homeplus ABSTB.