Invested KRW 130 Billion in MBK Fund III Blind Fund
Estimated Recovery of KRW 280 Billion Even Excluding Homeplus
Even if the entire KRW 29.5 billion that the National Pension Service (NPS) invested in Homeplus through MBK Partners' third blind fund is lost, it has been found that the total profit from MBK Fund III exceeds KRW 280 billion.
On the 19th, Changmin Han, a proportional representative of the Social Democratic Party, stated, "The KRW 29.5 billion that the NPS invested in Homeplus has completely evaporated," adding, "This is due to the NPS's careless investments in private equity funds. I am preparing a bill to prevent the NPS from investing recklessly in private equity funds."
Earlier, on June 13, MBK Partners announced that if a 'pre-rehabilitation plan merger and acquisition (M&A)' for Homeplus is carried out, it would accept losses by canceling its KRW 2.5 trillion worth of common shares in Homeplus free of charge. The NPS invested KRW 130 billion in MBK Fund III, established by MBK Partners in 2013, of which KRW 29.5 billion was invested in Homeplus common shares. The statement by Representative Han that the entire KRW 29.5 billion would be wiped out refers to the free cancellation of MBK's Homeplus common shares.
However, the private equity (PE) industry pointed out that "due to the nature of blind funds, the overall fund return must be considered." Blind funds invest in 6 to 8 companies at a time to diversify risk. MBK Fund III also invested in seven companies, including Orange Life, Doosan Machine Tools, Apex Logistics, Accordia Next Golf, and Tasaki, in addition to Homeplus.
MBK Fund III was established with a total size of KRW 2.7 trillion, and even excluding Homeplus, approximately KRW 6 trillion has been recovered. This amounts to a return of about 2.2 times the original investment. It can be estimated that the NPS invested KRW 130 billion and recovered about KRW 280 billion. According to materials submitted by the NPS to the office of Min Byungdeok, a lawmaker from the Democratic Party of Korea, the NPS had already written off the value of its Homeplus common shares to zero for accounting purposes by the end of last year. A PE industry insider commented, "Since the performance of a blind fund investment is determined by the fund's overall return, the NPS's investment in MBK Fund III can be considered a success."
However, separate from the KRW 29.5 billion invested in MBK Fund III, the NPS also invested KRW 582.6 billion in Homeplus redeemable convertible preferred shares (RCPS). To date, the amount recovered from RCPS, including refinancing and dividend receipts, is known to be KRW 313.1 billion. As of the end of last year, approximately KRW 480 billion in principal and interest remains.
Min Byungdeok pointed out, "The NPS has officially stated that, in the case of RCPS invested through a separate project fund, it is negotiating with the possibility of changes to conditions such as cancellation, capital reduction, merger, or interest rate adjustment," adding, "This means that even the RCPS investment is exposed to the risk of additional losses."
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