Creditors unlikely to redeem any after Lime Asset is declared bankrupt

[Graphics by Song Ji-yoon]

Lime Asset Management’s creditors will likely lose most of 520 billion won ($434 million) they paid out to investors on behalf of the hedge fund manager that suspended redemption of 1.7 trillion won ($1.4 billion) after mis-selling problematic products.

Seoul Bankruptcy Court is expected to declare Lime Asset Management bankrupt soon after having reviewed the financial status, which shows that the firm’s liabilities amount 529.9 billion won to far exceed its total asset of 19.2 billion won, according to data submitted by the Korea Deposit Insurance Corp. Worse yet, Lime Asset Management is unable to run any profit-generating operations after being slapped with the Financial Supervisory Service’s most severe punishment of financial investment business license cancellation.

Given the situation, Lime Asset Management will likely be declared insolvent, meaning it is unable to pay its debts.

Most of the hedge fund manager’s debts is compensation claims by fund sellers. Woori Bank and other sellers of Lime Asset Management’s problematic funds paid as much as 100 percent of investors’ money in accordance with the Financial Supervisory Service’s dispute settlement committee’s decision, and they are demanding payback from the asset manager. Woori Bank has reported 195.7 billion won as the debt that Lime Asset Management owes, Shinhan Bank 129.5 billion won, Shinyoung Securities 81.5 billion won, Hana Bank 63.4 billion won, Shinhan Financial Investment 40.4 billion won, Mirae Asset Securities 10 billion won, to total at 520.8 billion won. In addition, individual investors are claiming for 8.9 billion won worth bonds.

Korea Deposit Insurance predicts Lime Asset Management’s insolvency problem to grow worse as time passes as investors and fund sellers are expected to file for additional damage claims and receivables.

Once the court declares the Lime Asset Management bankrupt, it will collect creditors’ reports on debts and finalize the debt figures after verification. Then, it will realize the bankrupt firm’s remaining assets and distribute them to creditors in proportion to debt amount. The hedge fund manager, however, is expected to be able to repay only 3 percent of its total debts, based on its current financial status that creditors will hardly collect their money. Also, retrieval would take years, considering the long asset liquidation process and lawsuits on the fund manager.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]