The National Pension Service has formally recognized the potential for losses connected to its investment in Homeplus. It was also verified that the service obtained legal counsel indicating that the majority of the investment money is "challenging to be classified as rehabilitation claims."
In a reply received by Han Ji-a, a member of the People Power Party from the Health and Welfare Committee of the National Assembly, on the 2nd from the National Pension Service, the service mentioned, "There is a chance that the National Pension Service may face investment losses due to the start of Homeplus's rehabilitation process." The service further noted, "However, it is not possible to confirm investment losses solely based on the initiation of the rehabilitation process," and "It is anticipated that the result will depend on how the rights of creditors and shareholders are modified during the rehabilitation process and how the equity value changes after the proceedings are completed."
The National Pension Service allocated 612.1 billion South Korean won via a dedicated fund in 2015 during MBK Partners' acquisition of Homeplus. This comprised 582.6 billion South Korean won in Redeemable Convertible Preferred Shares (RCPS) and 29.5 billion South Korean won in common stock. Nevertheless, Homeplus was unable to resolve its liquidity issues and sought court-ordered corporate rehabilitation this March.
Of the National Pension Service's investments, the 29.5 billion South Korean won allocated to common stock is categorized as "equity investment," which by nature involves a significant risk of loss. The current focus is on RCPS. RCPS are financial products that enable investors to receive dividends throughout the contract term and either retrieve the principal at maturity or convert it into common stock. They exhibit features of both bonds and stocks. The problem arises because, following legal consultation with a law firm, the service was advised that "RCPS are challenging to be recognized as rehabilitation claims."
Rehabilitation claims, although secondary to public interest claims like salaries and termination compensation, provide an opportunity to reclaim funds throughout the rehabilitation period. Nevertheless, if they are not classified as rehabilitation claims, the chances of facing challenges in retrieving the invested money become much higher.
By the end of last year, Homeplus had successfully recovered a total of 313.1 billion South Korean won in investment funds, including dividend payments. Out of the initial investment of 582.6 billion South Korean won, 488.4 billion South Korean won is still remaining, while the fair value has been assessed at a total of 900 billion South Korean won.
Rep. Han Ji-a said, “The worry that the National Pension Service's investment in Homeplus might result in significant losses is turning into a reality,” and “To safeguard the public's retirement funds, all legal and administrative actions to reduce losses must be considered.”
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