This article was published on April 23, 2025, at 5:13 p.m. on the ChosunBiz MoneyMove site.
It has been confirmed that NICE Credit Rating decided to classify card payment receivables (ABSTB) under the borrowing fund category for credit evaluation in light of the Homeplus incident.
To explain by analogy, if an individual incurs too much credit card usage, the amount owed in card payments could become too large, which could strain their financial condition, and this will be reflected in the credit assessment.
According to investment banking (IB) industry sources on the 23rd, NICE Credit Rating plans to analyze the debt repayment capacity of certain corporations with excessive card payment amounts combined with borrowing funds during the regular evaluation scheduled for June, based on the audit report. Although it won’t officially mention borrowing funds in the report, it explains that it will consider it as adjusted borrowing funds added to existing nominal borrowing funds.
Principally speaking, card payment amounts are not considered borrowing funds. They do not significantly affect the creditworthiness assessment as they do not worsen the borrowing indicators of corporations. As a result, some corporations have begun to utilize them. Corporations that have seen their credit ratings drop or are facing financing difficulties have increased their actual short-term borrowing through purchase-only cards.
A typical example is the Homeplus incident. Homeplus has been purchasing goods from cooperating suppliers through purchase-only cards from Lotte, Hyundai, and Shinhan Card. The card companies initially pay the suppliers in cash and later recover the payments from Homeplus after a certain period. Homeplus uses purchase-only cards to 'buy on credit,' and the card company acquires receivables from Homeplus.
From the perspective of the card companies, they cannot solely rely on Homeplus. To reduce risk, they sought securities firms to securitize receivables. In the case of Homeplus, Shinyoung Securities emerged. The special purpose company (SPC) established by Shinyoung Securities issued short-term corporate bonds such as ABSTB based on these receivables, raising investor funds and transferring them to the card companies. Subsequently, when Homeplus repays the card payments, the investors will share the profits. However, investors experienced a loss of 400 billion won when Homeplus failed to repay these card payments.
As a result, there is a growing voice in the market that securitized debts should now be regarded as short-term borrowings and reflected in credit assessments. Recently, it is evident that corporations are increasing card payments due to financing difficulties stemming from economic slowdowns.
According to the Credit Finance Association, the performance of corporate purchase-only cards from nine domestic card companies, including Shinhan, Samsung, Hyundai, KB, Lotte, Woori, Hana, BC, and NongHyup, was 11.3 trillion won in the first quarter of this year. This represents a 27% (2.4 trillion won) increase compared to a year ago (8.9 trillion won). On an annual basis, card transactions between corporations reached 43.9 trillion won last year, marking the highest level since the establishment of the nine domestic card companies in 2014.
A source in the credit evaluation industry noted, 'If we look at companies with securitized card payments, there is a commonality that they are industries where credit ratings have dropped or where financing has not been successful in the past two years.'
Although not formalized like NICE Credit Rating, Korea Ratings is also considering how much card payment receivables have been securitized in its credit evaluation process. While it does not analyze all corporations, it explains that it reflects the particularly large securitized amounts in credit evaluations from before the Homeplus incident. Unlike the other two, however, Korea Ratings stated that it does not consider the securitized amounts as borrowing funds under audit report standards.
A source in the credit evaluation industry stated, 'From a practical standpoint, it is difficult to assess the amounts of securitized borrowing fund materials not disclosed in the audit report, and identifying the securitization status of the amounts calculated as unpaid also lacks accuracy.' They also mentioned, 'Since ABSTB has characteristics of both financial and trade receivables, it needs to be determined whether it is a borrowing fund or not.'