MBK Partners, one of Asia’s largest private equity firms, is under intense scrutiny for its decision to place Homeplus, Korea’s second-largest hypermarket chain, under corporate rehabilitation with investors anticipating a bumpy road ahead for the company’s debt restructuring.
Since the Seoul Bankruptcy Court approved Homeplus’ entry into a court-led rehabilitation program earlier this month, its largest shareholder, MBK, has faced mounting criticism for failing to take responsibility for the consequences of its decade-long management following the 2015 acquisition.
Amid growing concerns among investors over potential financial losses from Homeplus’ debt reduction and renegotiation process, the National Assembly’s Political Affairs Committee will summon MBK Chairman Michael Byung-ju Kim for questioning on March 18 regarding the Homeplus crisis.
Critics argue that MBK prioritized recovering its investment and repaying the substantial debt it incurred when acquiring Homeplus from Tesco for 7.2 trillion won ($4.9 billion) in 2015 — ultimately triggering a liquidity crunch.
The private equity firm is also embroiled in controversy over what some call a "dine and dash" approach, having filed for corporate rehabilitation unexpectedly and without implementing any self-rescue measures.
Additionally, a group of securities firms, including Shinyoung Securities, is reportedly considering filing a criminal complaint against Homeplus. They claim MBK knowingly sold short-term securities to institutional and individual investors despite anticipating the hypermarket chain’s entry into a rehabilitation program.
Separately, MBK is currently under a tax audit by the National Tax Service, which is investigating potential tax evasion related to the sale of Homeplus stores following the acquisition.
While MBK expected Homeplus’ debt restructuring to proceed smoothly — supported by its real estate assets valued at over 4.6 trillion won — the outlook for asset securitization appears uncertain.
Homeplus’ asset turnover ratio has deteriorated significantly over the past eight years under MBK’s ownership, raising concerns that the private equity firm deprioritized the retailer’s operations in pursuit of short-term profits.
This ratio, calculated by dividing sales by tangible assets, reflects how efficiently a company utilizes its assets to generate revenue.
In 2016, the year after MBK’s acquisition, Homeplus’ tangible asset turnover ratio stood at 1.13. However, it dropped to 0.73 in 2020 and has remained below 1 ever since, reaching 0.96 in 2023 — far behind its rival E-Mart’s 1.97.
A tangible asset turnover ratio below 1 suggests that the company’s sales are not proportional to the size of its assets, further deepening concerns over Homeplus’ financial health and long-term viability.
By Park Han-na (hnpark@heraldcorp.com)
