MBK Partners faces criticism over $400 million investor losses

In early March 2025, South Korea's Home Plus, a troubled discount chain, filed for corporate rehabilitation, revealing a deepening financial crisis that had been mounting for several years. The company, which had been struggling since 2021, reported significant annual losses primarily due to the impacts of the COVID-19 pandemic and heightened competition from online retailers such as Coupang, which significantly undermined its brick-and-mortar business model. Home Plus had been forced to rely on short-term funding strategies, including the issuance of unique asset-backed bonds designed to attract individual investors, all while its credit ratings were deteriorating. Prior to filing for rehabilitation, South Korea's credit rating agencies downgraded Home Plus's corporate rating from A3 to A3-, indicating a loss of confidence in the company's financial stability. This downgrade came after an alarming rise in its debt ratio, which peaked at 462% as of January 2025. Leading figures within MBK Partners, including chairman Michael Byungju Kim and Home Plus co-CEOs Kim Kwang-il and Joh Joo-yun, were accused of aiding in the sale of commercial papers and asset-backed bonds while allegedly aware that Home Plus lacked the capacity to repay, leading to losses for investors totaling around $400 million. The legal complaint filed against MBK and its affiliates argued that the management's actions demonstrated a disregard for the financial obligations to individual investors. As Home Plus's financial situation continued to decline, Jang, the lawyer representing concerned investors, emphasized that the situation suggested an intentional abandonment by MBK Partners regarding their financial responsibilities. Amidst this turmoil, he criticized the busy schedules of executives such as Kim Kwang-il, who juggles roles across 18 companies, suggesting a lack of focus on rescuing Home Plus from its dire condition. MBK Partners has responded to the worsening situation by attempting to divest from Home Plus in a bid to avoid liquidation and protect nearly 20,000 employees and numerous suppliers. They pledged to write off their entire stake valued at $1.8 billion, claiming that this strategy would save jobs and sustain stakeholders. Jang expressed skepticism, highlighting the irony in MBK's claim that Home Plus was an attractive opportunity, questioning why they did not choose to take over operations again after such a significant financial commitment. The company's management continues to grapple with fallout from its financial decisions as the situation worsens and lawsuits proceed.