Curious earns 15.7% IRR on Homeplus DIP loan ... MBK Partners (MBK) executives repay it [fn Market Watch]

[Financial News] Private equity firm Curious Partners achieved a net IRR of 15.7% on the debtor-in-possession (DIP) loan it extended to Homeplus. This was thanks to MBK Partners Chairman Kim Byung-joo, who, as a joint guarantor, used his personal funds to repay the loan’s principal and interest before maturity. The investment is viewed as having both supported payments to small business owners and generated returns while serving a public interest.
According to investment banking (IB) industry sources on the 8th, Curious Partners successfully collected 66.4 billion won in principal and interest on its Homeplus DIP loan that day from the joint guarantors, MBK Partners Chairman Kim Byung-joo and Vice Chairman Kim Kwang-il.
Curious Partners had first received 34.2 billion won, with the remaining 32.2 billion won due to be repaid that day, but it accelerated the schedule and had already recovered 95% of the remaining amount on the 1st. The loan was issued in May last year with court approval. It had a principal of 60 billion won, an annual interest rate of 10%, and a three-year maturity. The shorter loan period accelerated the recovery.
Curious Partners is said to have weighed both the public interest and profitability when deciding to invest. The loan proceeds were used exclusively to pay amounts owed to small business owners that trade with Homeplus, and not for any other purpose. The firm also judged the investment reasonably profitable because it was structured to earn 10% annual interest over two years. It expected repayment to pose no difficulty because senior MBK executives had provided joint guarantees.
The safeguards for recovering the debt were twofold.
Under the Debtor Rehabilitation and Bankruptcy Act, operating funds lent with court approval after rehabilitation proceedings begin are classified as public-interest claims. These can be repaid ahead of rehabilitation claims and at any time. The joint guarantees provided by executives on the major shareholder’s side further substantially reduced the risk.
The repayment also helps Homeplus’s rehabilitation. Chairman Kim has decided not to exercise a right of recourse against Homeplus for the money he repaid on its behalf. This reduces the company’s debt by the same amount. Neither Homeplus’s operating funds nor funds for carrying out its rehabilitation plan were used for the repayment. It also represents the major shareholder’s fulfillment of its social responsibility.
Homeplus filed for rehabilitation on March 4 of the same year, shortly after credit rating agencies downgraded its commercial paper rating from A3 to A3- at the end of February last year. As concerns grew that a short-term liquidity crisis could trigger a chain of defaults among its business partners, Curious Partners provided funding from a blind fund it manages.
Homeplus has appointed Samil PricewaterhouseCoopers as its sale adviser and is proceeding with the sale of its management control.
Since its establishment in 2016, Curious Partners has focused on special situations (SS) investing. It has also invested in companies that were previously undergoing rehabilitation proceedings, including Sungdong Shipbuilding & Marine Engineering (now HSG Sungdong Shipbuilding Co., Ltd.) and Sungwoon Tank Terminal. An IB industry source said, “Loans to companies undergoing rehabilitation carry significant reputational risks, making this an area where it is difficult to step forward readily.” The source added, “This case, in which the guarantee structure was carefully designed to support small business owners while generating returns, is also significant for helping revitalize Korea’s DIP financing market.”
[email protected] Kang Gu-gwi Reporter