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MBK pushes for sale and leaseback of Homeplus

All News 09:35 April 14, 2016

SEOUL, April 14 (Yonhap) -- MBK Partners, a Seoul-based private equity fund, has been pushing to sell some Homeplus stores and lease them back as a way to repay its debts nearing maturity, industry sources said Thursday.

In October, MBK bought British retail giant Tesco's Korean unit Homeplus for 7.2 trillion won (US$6.3 billion), in the nation's largest buyout deal ever. It formed a consortium with Singaporean sovereign wealth fund Temasek and two Canadian pension funds, taking a combined 4.3 trillion won of loans from four local lenders.

To deal with near-term maturities, MBK has selected Standard Chartered Bank Korea as the lead manager for the leaseback arrangement of Homeplus, South Korea's No. 2 discount retail chain, according to industry sources.

"MBK is considering a sale and leaseback, which are expected to create funds of around 500-700 billion won," a Seoul-based investment banker said, asking for anonymity due to the ongoing process.

A sale and leaseback deal is an arrangement in which the seller of an asset leases back the same asset from the purchaser. It is useful when companies need to untie the cash invested in an asset for other investments, but the asset is still needed in order to operate.

Upon signing the agreement, MBK promised to spend 1 trillion won in the first two years to strengthen the retail chain's competitiveness as part of efforts to assure its local employees.

Homeplus employs more than 26,000 people and operates 1,075 outlets in Asia's fourth-largest economy, including 140 hypermarkets and 609 supermarkets, as well as 326 convenience stores, according to Tesco.


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