MBK Offered 100 Billion KRW to Defend Homeplus Credit Rating

Expressed Willingness to Provide Credit Line During Credit Rating Downgrade Review

It has been confirmed that MBK Partners, the private equity fund that is the largest shareholder of Homeplus, expressed its intention to provide a credit line of up to 100 billion KRW during a credit rating agency's review regarding a downgrade in February.

According to the investment banking (IB) industry on April 22, Homeplus and MBK requested a review from Korea Investors Service on February 26, the day after they were notified that Homeplus's short-term credit rating would be downgraded from 'A3' to 'A3-'.

At that time, Homeplus and MBK changed the redemption conditions of the redeemable convertible preferred shares (RCPS) issued by Homeplus so that the debt could be accounted for as equity. As a result, approximately 1.1 trillion KRW in RCPS was reclassified from debt to equity on the balance sheet, effectively lowering the company's debt ratio.

In addition, they proposed to the credit rating agency a plan in which MBK would provide a credit line of up to 100 billion KRW, using its own credit, if requested by Homeplus. This effectively meant that MBK guaranteed support of up to 100 billion KRW in the event that Homeplus faced a short-term liquidity issue.

Credit rating agencies have claimed that they warned Homeplus of a possible downgrade following the first investor relations (IR) meeting in mid-February. As a result, financial authorities found MBK's claim that it could not have predicted the downgrade at the time of the Homeplus bond sale to be unconvincing.

MBK stated, "We did not anticipate the possibility of a downgrade in Homeplus's credit rating to the extent that we even offered a 100 billion KRW credit line during the credit rating agency's review on February 26," adding, "However, as the credit rating was ultimately downgraded and the company was pushed to the brink of default, we had no choice but to urgently apply for rehabilitation proceedings."