A Homeplus store in central Seoul. [Herald DB]
A Homeplus store in central Seoul. [Herald DB]

South Korea's financial regulator has proposed that lenders who financed Homeplus leased stores form a creditor consortium. With concerns mounting over the viability of individual store sites as Homeplus struggles to pay rent, attention is turning to whether the consortium could coordinate loan maturity extensions and repayment deferrals to cushion the restructuring process.

The Financial Supervisory Service convened a meeting Tuesday afternoon with banks that had provided financing to Homeplus leased stores, according to financial industry sources.

Based on accounts from attending banks, the FSS proposed at the meeting that lenders establish a creditor consortium, with the aim of pursuing site-level restructuring through coordinated discussions among the group.

The proposal is understood to mean that lenders should buy time until restructuring is complete: deferring interest payments for sites that cannot currently service their debt, and extending loan maturities for sites where repayment deadlines are approaching.

The concern is that if senior creditors move to recover assets, the sites themselves could be destabilized, with the fallout cascading to junior lenders in a domino effect. Banks typically hold senior positions, while capital companies and savings banks tend to be junior creditors.

"If a site defaults right now, senior creditors could recover their assets without taking a loss — but junior creditors could not," an official at one bank said. "We understand the proposal as a call to engineer a soft landing for the sites through the creditor consortium."

The regulator also conveyed its willingness to actively support creditors if they need assistance while pursuing restructuring measures — such as changing the designated use of Homeplus leased properties.

One banking industry official said, "We sympathize with the regulator's intent, but the truth is we have to tread carefully — refraining from exercising collateral rights or conducting post-management even as risks grow could raise questions of breach of fiduciary duty."

The FSS plans to hold similar creditor meetings with other financial sectors, starting with banks Tuesday and moving on to the specialized credit finance industry.

Homeplus had carried out sale-and-leaseback transactions as its cash flow deteriorated — selling stores it owned to landlord operators and then re-entering as a tenant.

Most of the landlord operators are special purpose companies formed specifically to acquire the assets, and financial institutions including banks provided funding to those SPC Group entities through funds or real estate investment trusts. The combined exposure of the five major banks stands at around 1 trillion won ($653 million), with total exposure across the financial sector estimated at around 3 trillion won.


hyuk@heraldcorp.com
ehkim@heraldcorp.com