Korean savings banks have invested approximately 50 billion won in real estate investment trusts (REITs) backed by Homeplus stores, it has emerged. Losses on the equity investments are effectively unavoidable. Analysts say the collateralized loans also face uncertain recovery prospects, as they rank behind senior claims in repayment priority.
Savings banks' exposure to Homeplus REITs totaled 47.6 billion won, according to financial industry sources on the 9th. Of this, subordinated collateralized loans accounted for 37.6 billion won and common stock investments for 10 billion won.
Investments tied to the Homeplus Ulsan Dong-gu store were particularly large. Daishin Savings Bank extended a 10 billion won subordinated collateralized loan to Daehan No. 21 REIT. KB Savings Bank (5 billion won), Yegaram Savings Bank (4.7 billion won) and Hana Savings Bank (3 billion won) are also part of the subordinated lending syndicate. Daol Savings Bank and OSB Savings Bank each invested 3.5 billion won in common stock, while JT Savings Bank invested 3 billion won.
For KB Sadang Retail REIT, which holds the Homeplus Sadang store, Daishin and Goryeo Savings Bank each extended 3 billion won in third-priority mortgage loans. For JR No. 24 Corporate Restructuring REIT, which holds the Homeplus Gangseo store and the company's headquarters building, Keumhwa Savings Bank (1.8 billion won), Woori Financial Savings Bank (2.7 billion won) and JT Chinae Savings Bank (4.4 billion won) participated in subordinated collateralized lending.
Major Homeplus stores are currently paying only part of their rent to the REITs, their landlords. As a result, interest on the loans is being paid normally, but dividends to equity investors have been cut off.
Recovery prospects for the principal also diverge depending on the type of investment. The collateralized loans carry mortgage rights, allowing partial recovery, but since all of the savings banks' loans are subordinated, losses could occur if remaining assets fall short after senior claims are repaid. Equity investments, by contrast, are structured to receive residual assets only after all debts are repaid, making recovery of the invested funds effectively unlikely.
The savings banks plan to finalize their response measures around the time of a financial industry meeting. "If Homeplus's bankruptcy is confirmed, we plan to reclassify the loans as substandard or below and set aside additional provisions," a savings bank official said. "Since we hold collateral rights, a bankruptcy would not immediately lead to a total loss of the loans."
