Meritz Financial Group said Thursday it is taking shareholder concerns "seriously" after some investors pushed back against its decision to provide debtor-in-possession financing to Homeplus.
Meritz posted an open letter to shareholders on its website that day, explaining the rationale behind its decision to extend a 100 billion won ($65 million) DIP loan to the struggling retailer. The announcement came as Meritz and MBK Partners continue to trade sharp words over the size of the financing.
"Shareholders have conveyed concerns that a large increase in high-risk loans could depress the share price and erode shareholder value, and that management could face breach-of-fiduciary-duty liability if the loans result in losses," Meritz said. "Group management is taking these concerns seriously."
On the decision to provide 100 billion won in support, Meritz said it "could not simply turn away from its social responsibility toward the livelihoods and job security of the many stakeholders involved — including small merchants and suppliers operating within Homeplus stores, as well as the large number of workers employed by Homeplus." It added that "fulfilling social responsibility is ultimately consistent with protecting shareholder value."
Meritz also stressed that a personal guarantee from MBK Partners Chairman Kim Byung-ju was included as a precondition for disbursing the DIP loan, saying it would make "no compromise or concession." On the loan amount, the company said it viewed the figure as "the minimum threshold to avoid various legal disputes."
Meritz said the decision was not without internal debate. "Heated discussions took place at the board meetings of each Meritz Financial Group affiliate convened to approve the loan, and some boards voted it down," it said, adding that members ultimately agreed "the loan must be premised on Homeplus's viability and repayment stability, and that capping the amount is indispensable to achieving that."
The company said it believes "the best outcome is to recover principal and interest smoothly through a rehabilitation process, not through Homeplus's bankruptcy or liquidation," and that it plans to "actively cooperate with the rehabilitation proceedings going forward."
Meanwhile, the Seoul Bankruptcy Court sent an official notice to Homeplus creditors and the labor union ordering them to submit a plan to raise 200 billion won ($130 million) by June 30. The deadline for court approval of a rehabilitation plan is July 3.
siuu@heraldcorp.com
