Why AK Plaza Handed Over Mapo Aekyung Town

Sale of Core Assets and Full Mobilization of Affiliate Support
AK Plaza Bets Everything on Securing Liquidity

AK Plaza, which is currently facing a liquidity crisis, has sold off a series of its core assets. The financial lifeline came from AK Holdings, the holding company of Aekyung Group, which injected capital by acquiring 'Mapo Aekyung Town,' where the group headquarters is located. Last year, Aekyung Group sold its founding company, Aekyung Industry, due to a liquidity crisis that began with the Jeju Air Muan incident at the end of the year. Now, the group appears to be focusing all its resources on supporting AK Plaza, which has fallen into capital erosion.

According to the Financial Supervisory Service's electronic disclosure system on December 11, AK Plaza sold a 99.11% stake (3,186,994 shares) in Mapo Aekyung Town to AK Holdings for 45.539 billion won. Considering that the book value is around 16.1 billion won, it is estimated that a disposal gain of approximately 30 billion won will be realized. This is a direct liquidity support measure from the holding company for AK Plaza, which is experiencing deepening capital erosion. AK Plaza explained that this was "to improve the financial structure."

Previously, AK Plaza disposed of beneficiary certificates from the real estate fund 'Capstone Private Real Estate Investment Trust No. 50' (now Igis X Private Real Estate Investment Trust No. 14), which includes the Bundang branch, to its holding company AK Holdings and affiliate Gwangju Investment Development (formerly Aekyung Jungbu Country Club). This fund was an asset that AK Plaza had fully reacquired from Capstone earlier this year.

At that time, the company stated that the decision was made "to establish a reinvestment base for the continued growth of the Bundang branch." The purchase price was about 189 billion won. Later, in October, AK Plaza sold 92.2% of the fund's beneficiary certificates to AK Holdings and Gwangju Investment Development for 61 billion won (29.1%, 559,000 units) and 130 billion won (63.1%, 1,192,000 units), respectively.

The cash secured by selling core assets to affiliates was used to repay funds borrowed from AK Holdings. In January this year, AK Plaza borrowed 100 billion won from AK Holdings at an interest rate of 5.83% to finance its subsidiary's operations. AK Plaza repaid 61 billion won of the loan through the sale of Bundang branch beneficiary certificates, and after the disposal of Mapo Aekyung Town, it repaid the remaining 39 billion won in full.

It is also understood that the proceeds from the asset sale were used for the refinancing of Igis X Private Real Estate Investment Trust No. 14 (qualified), for which the Bundang branch is the underlying asset. Refinancing refers to restructuring existing loans with new financing. As the Capstone fund reached maturity and the fund manager changed to Igis, refinancing was carried out.

This refinancing involved AK Plaza, AK Holdings, and Gwangju Investment Development. AK Plaza lent 30 billion won to the special purpose company (SPC) J On Life for refinancing, while AK Holdings lent 53 billion won to SPC J On Mild. The loan maturities were set for two years later. Gwangju Investment Development also lent 20 billion won to J On Life. In addition, during the refinancing process, 67 billion won in senior class 1 beneficiary certificates were newly issued. Class 1 beneficiary certificates are senior bonds, ensuring principal repayment and priority dividends. It is analyzed that all mezzanine and subordinated tranches were covered by loans from AK Plaza, AK Holdings, and Gwangju Investment Development.

An AK Holdings representative stated, "The sale of Mapo Aekyung Town was part of the group's portfolio restructuring. For AK Plaza, it was a way to secure liquidity, while for AK Holdings, it meant acquiring a new subsidiary capable of generating stable cash flow, resulting in mutual benefit. Although the refinancing participation funds are classified as non-current assets, we consider them investment assets that can be liquidated at any time through bond sales or other means depending on market conditions."

AK Holdings has also been consistently providing payment guarantees for AK Plaza. On November 11, the holding company replaced the collateral for a 12.2 billion won loan that AK Plaza borrowed from KB Kookmin Bank, changing the pledged 2.17 million shares of Aekyung Industry provided by Aekyung Asset Management to 2.19 million common shares of Aekyung Chemical. Aekyung Asset Management is a 100% family-owned company held by Vice Chairman Chae Hyungseok and other members of the founding family. As Aekyung Industry was transferred to Taekwang Group, AK Holdings stepped in to provide the guarantee instead.

The problem is that AK Plaza's financial structure continues to deteriorate. As of the third quarter of this year, total assets stood at 1.063 trillion won, while liabilities reached 1.0541 trillion won. Total equity is only 8.9 billion won. The company posted a net loss of 57.3 billion won last year, and accumulated deficits have expanded to the 130 billion won range. This is due to a combination of a shrinking number of consumers visiting offline stores as the online market expands, and weakening department store competitiveness in key commercial areas such as Bundang and Suwon. As of the cumulative third quarter of this year, AK Plaza's sales amounted to 185.8 billion won, down 15.4% from the same period last year. Net loss for the period was 34.8 billion won.