[이코노미스트 안민구 기자] South Korean financial authorities are considering restrictions on private equity fund acquisitions in critical industries and sectors closely tied to public welfare.

The review follows the Homeplus crisis and MBK Partners’ management control dispute over Korea Zinc, which have prompted calls for stronger public-interest safeguards.

Financial Services Commission Chairman Lee Eok-won told a National Assembly National Policy Committee hearing on July 29 that he supported the broader intent of the proposal.

“I agree with the need to strengthen public-interest protections against certain PEFs that pursue short-term profits,” Lee said.

During the hearing, Democratic Party lawmaker Kang Jun-hyun criticized MBK Partners for reportedly holding an investor briefing in the United States to support its bid for control of Korea Zinc while Homeplus remained under court-led rehabilitation.

“Should private equity funds be allowed to acquire control of companies in critical industries or sectors directly connected to people’s livelihoods without regulatory intervention?” Kang asked.

Asked whether Korea Zinc should be considered part of a critical national industry, Lee replied, “Yes.” He added that authorities were continuously monitoring the Homeplus rehabilitation proceedings.

Citing regulatory frameworks in countries including the United States and Australia, Kang called on South Korea to consider restricting private equity investment and management control in sectors with high public importance, such as telecommunications, healthcare and water supply.

Lee agreed on the need for regulatory safeguards but said further discussion was required over their scope and structure.

“We need to determine which industries should be covered, what regulatory measures should be adopted and what form the legislation should take,” Lee said. “We also need to consider whether to regulate PEFs directly or restrict entry into specific industries.”

He also warned that curbs limited to domestically registered private equity funds could have unintended consequences.

“Even if domestic PEFs are restricted, foreign capital could acquire those companies instead,” Lee said. “We need to discuss which legislative approach would be most effective.”

The hearing also addressed the repayment priority of debtor-in-possession financing provided during the Homeplus rehabilitation process.

Kang questioned whether DIP financing involving MBK Partners and Meritz Financial should be classified as an administrative claim with repayment priority over existing creditors, including investors in short-term electronic bonds.

Financial Supervisory Service Governor Lee Chan-jin said the issue should be reviewed in light of the structure of DIP-style rehabilitation, under which existing management remains in control of the company.

“Unlike an ordinary rehabilitation process led by a court-appointed receiver, questions may arise over whether funds provided by parties responsible for management failures should be classified as administrative claims when existing management continues to operate the company,” Lee said.

“If there is a problem, it should be corrected,” he added, saying the FSS would consult with the FSC on possible improvements.

MBK Partners has said it intends to waive the priority repayment rights attached to its DIP claim. Questions remain, however, over the legal status of Meritz Financial.

Democratic Party lawmaker Yoo Dong-soo said DIP financing generally holds repayment priority over short-term electronic bonds under the current system and called for clarification of Meritz Financial’s rights.

“MBK has indicated that it will waive its rights, while Meritz Financial provided a guarantee,” Lee said. “We plan to verify the relevant details.”

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