MBK chairman to leverage own funds to pay Homeplus suppliers

Michael ByungJu Kim, the co-founder, partner and chairman of Northeast Asia-focused private equity firm (PEF) MBK Partners Ltd., is expected to leverage his personal wealth to pay suppliers to Homeplus Co., South Korea’s major retailer under court protection.

“Chairman Kim will come up with a financial support plan to pay small- and medium-sized (Homeplus) suppliers without delay,” read a statement released by MBK on Sunday, which added that the PEF is currently evaluating the total payment amount to determine the payment size and methods.

The statement comes as payments to Homeplus suppliers, which provided the retailer goods and services between Jan. 1 and Feb. 11, have been delayed.

MBK, which wholly owns Homeplus, estimated the priority debts Homeplus owed to small- and medium-sized merchants at 458.4 billion won ($316.1 million) and has paid back about 340 billion won.

The remaining 120 billion won will likely be paid with MBK Chairman Kim’s funds, in what would be the first case in Korea that a PEF's management has leveraged personal wealth to support a company it has invested in.

GROWING PRESSURE TO SHARE BURDEN 

Earlier this month, Homeplus filed for corporate rehabilitation with a Seoul court amid growing market concerns about the retailer’s financial crunch.

The move, which came as a surprise, caused a market backlash as Homeplus had been selling short-term debts in the capital market until immediately before filing for court protection, without notifying investors of the retailer’s financial difficulties.

MBK attributed the abrupt decision to a series of credit rating downgrades of Homeplus, including a rating cut of Homeplus' corporate bonds to A3 minus from A3 by Korea Investors Service Inc., a Moody’s affiliate, in late February.

If MBK and Homeplus were found to have been aware of the possibility of court receivership before the retailer’s last-minute sales of short-term debts, they could be accused of fraudulent bond sales, according to legal experts.

Korea’s financial authorities and political circles have also ratcheted up the pressure on MBK to hold it accountable for the Homeplus upheaval.  

Chairman Kim has been summoned to parliament for an emergency hearing on Tuesday as a witness to discuss the Homeplus fiasco.

Meanwhile, last week the Seoul Regional Tax Office embarked on a special tax probe into MBK. 

Such intense societal pressure, which is suspected of having led the MBK chairman to leverage his personal wealth to bear the financial burden, is widely supported, although some observers have argued it is not necessary to drive the asset manager operating the funds of limited partners to the wall, beyond its legal obligation.

Last July, Korea’s largest institutional investor, the National Pension Service (NPS) committed a combined 1 trillion won ($723.2 million) to MBK and three other PEFs.

INFLUENTIAL FIGURE IN THE CAPITAL MARKET

MBK Chairman Kim was named one of the most influential figures in Korea’s capital market last year.

He has seen his clout over capital markets across Asia grow considerably in recent years.

Kim co-founded MBK in Seoul in 2005 after leaving Carlyle Asia Partners. The North Asia-focused PEF manages more than $30 billion in assets and has commitments from some 150 global institutional investors, including Korea’s NPS, Singapore’s sovereign wealth fund GIC, and the Canada Pension Plan Investment Board.

His wealth is estimated at 14 trillion won as of 2024.

Forbes named him Korea’s second richest person after Samsung Electronics Co. Chairman Jay Y. Lee in 2024, down one notch from 2023. 

MBK was reportedly paid 363.0 billion won to manage the fund, which invested in Homeplus, plus 769.5 billion won in carried interest as of the end of last September.

Write to Jun-Ho Cha at chacha@hankyung.com
Sookyung Seo edited this article.