[비즈한국] With portfolio risks for MBK Partners mounting following the decision to terminate Homeplus's rehabilitation proceedings, the sale of Lotte Card—another key investment—is also facing mounting variables. Lotte Card is currently facing a disciplinary plan approved by the Financial Supervisory Service (FSS) Sanctions Review Committee, which includes a 4.5-month business suspension, a 5-billion-won penalty, and a disciplinary warning for former CEO Cho Jwa-jin, in connection with a personal data leak incident. The final level of sanctions will be confirmed after a deliberation by the Financial Services Commission (FSC). If the sanctions are finalized close to the original proposal, it is expected to place a greater burden on the Lotte Card sale process pushed by MBK Partners.
Lotte Card Awaits FSC Decision as Sale Price Becomes Volatile
According to the financial sector, the FSC is currently reviewing the sanctions proposal passed by the FSS regarding Lotte Card's personal data leak. Previously, the FSS held a sanctions review committee in April and approved measures including a 4.5-month business suspension, a 5-billion-won penalty, and a disciplinary warning for former CEO Cho Jwa-jin. The FSS proposal will be finalized following a regular FSC meeting.
In September last year, a hacking incident at Lotte Card resulted in the leak of information belonging to 2.97 million people, nearly one-third of its total member base. Of these, 280,000 individuals had their card numbers, expiration dates, and CVC numbers exposed, requiring card reissuance. Lotte Card has maintained that the nature of this incident differs from the 2014 data leak by an employee, arguing that imposing a business suspension for a hacking-related breach is an unprecedented level of sanction.
While there is a possibility that the level of sanctions could be lowered based on the FSC's judgment, a finalization close to the original proposal would inevitably have a negative impact on the sale of Lotte Card. A business suspension would place direct pressure on new business and brand credibility. Since expanding the member base and increasing usage are crucial for corporate valuation in the credit card industry, potential buyers are bound to adopt a conservative approach to pricing as long as sanction risks persist.
Lotte Card's largest shareholder is Korea Retail Card Holdings, a special-purpose entity under MBK Partners. According to Lotte Card's regulatory filings, Korea Retail Card Holdings held a 59.83% stake as of March 31 of this year. Woori Bank and Lotte Shopping hold 20.00% each, and other minority shareholders hold 0.17%. MBK Partners has been pursuing the sale of Lotte Card as part of an investment recovery strategy since acquiring it in 2019 through a consortium with Woori Bank.
However, the sales environment is not favorable. Profitability across the credit card industry has declined, and Lotte Card's own performance has slowed compared to the past. Added to this are the personal data leak incident and the possibility of financial regulatory sanctions, leaving potential buyers with no choice but to carefully consider the costs and reputation risks to be assumed post-acquisition. Observers in the financial sector suggest that it will be difficult for sale negotiations to gain momentum until the sanctions are finalized.
Concerns Over Contagion from Homeplus Insolvency
Another variable in the Lotte Card sale is Homeplus. On the 3rd, the Seoul Rehabilitation Court decided to terminate the corporate rehabilitation proceedings for Homeplus. The court determined that Homeplus failed to secure approximately 200 billion won in minimum operating funds required to carry out its rehabilitation plan. While Homeplus can file an immediate appeal within 14 days, the key to resuming rehabilitation is finding a way to secure operating funds.
Both Homeplus and Lotte Card are companies in which MBK Partners is a major shareholder. For this reason, there is speculation that as the Homeplus rehabilitation process falters, MBK’s portfolio risks may spread to Lotte Card. In particular, the corporate purchasing card transactions Lotte Card has maintained with Homeplus are at the center of the controversy.
According to data released by the office of Rep. Lee In-young of the Democratic Party of Korea (National Policy Committee), Lotte Card has classified 79.3 billion won in Homeplus-related receivables as "estimated losses" with a low probability of full recovery. These receivables originated from corporate purchasing cards and corporate card transactions used by Homeplus to settle payments with suppliers. Of this, the receivables related to corporate purchasing cards are reported to be worth 60 billion won.
Corporate purchasing cards are structured such that companies pay for outstanding debts to partners via card, with the card company paying first and recovering the amount from the company after a certain period. As the card company bears the credit risk of the transacting company, the deterioration of the counterparty's financial situation can affect the soundness of the card company.
According to Rep. Lee's office, the volume of Lotte Card's purchasing card transactions with Homeplus increased nearly 10-fold from 75.9 billion won in 2022 to 795.3 billion won in 2024. This means these transactions have emerged as a risk factor for Lotte Card around the time Homeplus applied for rehabilitation. While Lotte Card maintains that it has pre-reflected the potential for loss in its accounting, concerns over the actual recoverability of funds could intensify now that the Homeplus rehabilitation process has been terminated.
MBK Accountability and Shaky Exit Strategy
For MBK Partners, Homeplus and Lotte Card have become concurrent burdens. With Homeplus facing possible liquidation following the termination of its rehabilitation process, and Lotte Card facing sanctions for data leaks and the burden of Homeplus-related receivables as variables in its sale, the private equity firm's investment recovery strategy and post-management accountability are being questioned.
In particular, the Homeplus situation is fueling criticism of MBK Partners from political and labor circles. The "private equity style" of management—ranging from the sale of hypermarket stores and sale-and-leasebacks to the application for rehabilitation and failure to secure operating funds—has come under fire. Under these circumstances, if Lotte Card also becomes embroiled in sanctions and delays in its sale, market sentiment regarding MBK Partners' ability to manage its domestic portfolio is bound to become even colder.
Financial experts identify the level of FSC sanctions and the losses related to Homeplus as the key variables that will determine the success or failure of the Lotte Card sale. If the sanctions are reduced, some uncertainty may be resolved, but if the business suspension and heavy disciplinary action against the former CEO are finalized as originally proposed, the likelihood of buyers demanding price cuts increases. The possibility of recovering Homeplus-related receivables could also become a major issue during the due diligence process.
An official from the credit card industry noted, "Lotte Card is still a company with a strong member base and brand recognition, but it is difficult for a buyer to actively commit to a price when sanctions, performance issues, and shareholder risks are overlapping simultaneously. Sale discussions are unlikely to move forward until after the FSC decision is made."