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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] SEOUL, Oct. 21 — South Korea’s National Assembly is set to turn its attention from private equity firm MBK Partners to Meritz Financial Group amid ongoing controversy over the corporate rehabilitation of Homeplus. Lawmakers are expected to question Meritz’s high-interest lending practices toward Homeplus as well as an insider trading case involving a former Meritz Fire & Marine Insurance CEO.
According to industry sources, Kim Yong-beom, Vice Chairman of Meritz Financial Group, is scheduled to testify before the National Policy Committee’s audit of the Financial Supervisory Service (FSS) on Monday. He will be the only head of a financial holding group to appear in this year’s audit.
Meritz’s ₩1.3 trillion (US$950 million) loan to Homeplus, issued in May 2023, is expected to be a key focus. The loan, secured by 63 Homeplus store properties, carried an 8% annual interest rate and a three-year maturity — accounting for the bulk of Homeplus’s total ₩1.45 trillion in financial debt. Meritz has already collected ₩2.56 trillion in interest, fees, and partial principal repayment as of May this year.
Lawmakers are likely to criticize the effective borrowing cost, which reached 11–13% annually once additional fees such as withdrawal and arrangement charges were included. Homeplus also faced early repayment penalties of up to 14%, allowing Meritz to reap high returns in a short period.
In its bankruptcy filing, Meritz is reported to have added ₩86.1 billion (US$63 million) in “virtual interest” based on internal rate of return (IRR) projections of 11.5–13%, assuming a loss of benefit of time (EOD) on March 4, 2025 — the date Homeplus filed for court receivership. “It appears structured to push interest income to the legal maximum,” one investment industry official commented.
Despite public criticism, analysts say Meritz is unlikely to face financial losses, regardless of whether Homeplus restructures or is sold. An audit report by PwC Korea in June estimated Homeplus’s liquidation value at ₩3.68 trillion, with Meritz’s property-backed collateral deemed fully secured. Even if Homeplus proceeds to bankruptcy, Meritz is expected to recover its principal investment in full.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
