[Alpha Biz= Paul Lee] SK Securities has been found to have extended loans worth nearly KRW 100 billion to Oh Chang-seok, chairman of Mugunghwa Trust, using shares of the unlisted company as collateral.

According to the securities industry on Jan. 26, SK Securities arranged a KRW 150 billion loan for Oh, the owner of Mugunghwa Trust, in June 2023, directly providing KRW 86.9 billion secured by his shares in the trust company.

Shortly after the loan was executed, SK Securities structured the unlisted-share-backed loan and resold approximately KRW 44 billion worth of exposure to institutional and individual investors.

The collateral consisted of Oh’s controlling stake in Mugunghwa Trust, equivalent to a management control interest of 50% plus one share.

However, an event of default (EOD) occurred just five months after the loan was issued. Because the collateral involved illiquid shares of an unlisted company, SK Securities was reportedly unable to pursue standard recovery measures such as forced liquidation.

As a result, some investors failed to recover their principal. In response, SK Securities provided advance payments equivalent to 30% of the invested amount, totaling KRW 13.2 billion, to affected clients.

SK Securities is currently seeking to recover the loan by selling the management control stake in Mugunghwa Trust. The firm said the advance payments were provided to alleviate liquidity issues faced by investors. It also added that more than 80% of the loan amount had been set aside as provisions by the end of last year.

 

 

 

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