Korea's private equity fund operator Curious Partners is pursuing a loan of 60 billion won to Homeplus, which is undergoing corporate rehabilitation procedures. This is aimed at supporting payment funds for small business transactions.
According to investment banking (IB) industry sources on the 10th, Curious Partners is pushing for a loan in the form of Debtor In Possession (DIP) financing for Homeplus. They have currently submitted an application to the court for loan approval, and the loan will proceed once the court makes a decision. The loan amount is 60 billion won, the interest rate is 10% per annum, and the maturity is 3 years. This is a structured investment secured through the joint guarantee of Kim Byung-joo, chairman of MBK Partners.
DIP financing is a type of bailout that provides funds to corporations that have initiated corporate rehabilitation procedures. Securing operating funds and financing for the conclusion of rehabilitation are essential for the success of the rehabilitation. However, from the investors' perspective, they may be reluctant to invest in corporations undergoing rehabilitation due to excessive liabilities and the uncertainty of rehabilitation. DIP financing was introduced to address these issues with funding.
Investors can receive higher interest rates than market rates because they invest in high-risk corporations, and they can be repaid before other creditors. The United States, where DIP financing originated, offers an incentive called super-priority for DIP financing. In South Korea, the Debtor Rehabilitation Act stipulates that 'public claims related to borrowed funds, which are authorized by the court to continue the debtor's business, are prioritized over other public claims.' This means that the repayment order of DIP financing loans takes precedence over public claims such as payment to suppliers or worker wages.
In South Korea, companies such as Ssangyong Motor, Tongyang Construction, Kumo Hi-Tech, and Skin Food have utilized DIP financing during corporate rehabilitation procedures. Kumo Hi-Tech secured funds by issuing corporate bonds worth 20 billion won (with an interest rate of 8%) to UAMCO and Opus PE. HY provided an emergency support of 60 billion won to Mesh Korea, which operates 'Vrooom,' through DIP financing and later acquired management rights. Most recently, Curious Partners and Q Capital Partners carried out 10 billion won of DIP financing for WINIA AID.
Curious Partners plans to proceed with a loan to Homeplus using a blind fund currently under management. Last month, Curious Partners decided on a private equity fund worth 430 billion won for corporate financial stability.