KCI, the parent company of D’Live, is on the brink of a default one month ahead of the maturity of its loans. D’Live is the largest multi system operator in the metropolitan area of South Korea.
In a case where the creditors do not agree to an extension of the maturity of the 2.2 trillion won acquisition financing, KCI, which has been invested by MBK Partners and Macquarie Korea Opportunities Fund, cannot avoid a bankruptcy and 21 lenders’ losses and MBK Partner’s reliability can take a direct hit. Established in 2005, MBK Partners is the largest PEF in South Korea, running funds worth 12 trillion won in total.
The lenders including the National Pension Service and KEB Hana Bank are going to reach a conclusion by this weekend with regard to the maturity extension and debt restructuring. The National Pension Service is opposed to the extension of the maturity and limit of the D’Live’s debt in view of the company’s financial structure. The lenders’ options include an 800 billion won portion of the total acquisition financing being converted into redeemable convertible preference shares, extension of the maturity by two years, interest rate cut to 4% or so and shareholding reduction by MBK Partners’ and Macquarie Korea Opportunities Fund’s capital reduction.
The acquisition financing in question is divided into KCI’s 1.567 trillion won and D’Live’s 633 billion won loans, both maturing on July 29. According to industry sources, D’Live is in no condition to repay the interest, not to mention the principal, due to the huge size of its debt. D’Live paid 62.6 billion won in 2014 and 45.8 billion won last year in interest cost.
MBK Partners and Macquarie Korea Opportunities Fund acquired D’Live in 2007 by using an equity capital of 900 billion won and an acquisition financing of 1.4 trillion won. They repaid an interest of more than 100 billion won each year by utilizing D’Live’s profits and loans. They increased the amount of the borrowing to over two trillion won in 2012, extending the maturity by four years. Since then, D’Live’s business has deteriorated and MBK Partners and Macquarie Korea Opportunities Fund have failed to dispose of the company for repayment.