Lime Bad Bank's First Step "Fund Transfer to Be Completed Within This Month"

Corporate Establishment by Late June, Official Launch in August
Accelerating Investor Asset Recovery and Compensation

[Asia Economy Reporter Park Jihwan] The establishment of a newly created bridge management company (bad bank) responsible for asset recovery and compensation of Lime Asset Management's suspended redemption funds worth 1.7 trillion KRW has taken its first step. As the establishment of the bridge management company becomes concrete, not only the recovery of investor assets but also financial authorities' sanctions against Lime Asset Management and sales companies are expected to accelerate.

According to financial authorities and the financial investment industry on the 10th, 20 Lime fund sales companies agreed to form a joint agreement and officially launched a task force to establish the bridge management company. The Lime sales companies' joint response team stated, "We plan to finalize the shareholder agreement, establish the corporation, register the management company, and complete the fund transfer procedures by the end of June," adding, "We will continue consultations with supervisory authorities to expedite approval of capital contributions, corporate establishment, and management company registration during the establishment process." The bridge management company will operate for about six years to recover Lime fund investor assets. It is scheduled to complete corporate establishment next month, undergo the financial authorities' professional private equity management company registration review, and officially launch in August.

The bridge management company plans to transfer almost all assets, including 173 sub-funds invested in four master funds of Lime Asset Management. The Lime funds to be transferred amount to a total of 1.6679 trillion KRW based on the master funds, including the Trade Finance Fund (Pluto TF-1), Thetis No. 2, Pluto FI D-1, and Credit Insurance (CI) Fund. Fund management and recovery of non-performing assets are expected to be handled by Moon Kyung-seok, Chief Investment Officer (CIO), who was recruited by Lime in February.

The initial capital of the bridge management company is 5 billion KRW, with Shinhan Financial Group affiliates (Shinhan Investment Corp. 17.6%, Shinhan Bank 6.4%) holding the largest stake at 24%. Woori Bank holds the second-largest stake at around 20%. The final capital contribution ratio will be confirmed through a shareholder agreement to be conducted later. A representative from a participating sales company in the bridge management company explained, "The personnel composition will include some Lime staff who are most familiar with the current suspended redemption situation," adding, "We plan to immediately start discussions related to shareholder agreements among participating companies."

Even if the bridge management company is launched, there are doubts about whether it can properly handle the existing suspended redemption assets. This is because most of Lime's sub-funds have losses ranging from at least 50% to total loss. Unlike the bad bank led by Korea Asset Management Corporation (KAMCO) in the past, which cleaned up non-performing loans in the banking sector, the lack of a clear central authority and potential disagreements among shareholders regarding asset handling direction pose challenges that must be overcome.

Financial authorities' sanction procedures against Lime Asset Management are expected to accelerate rapidly. The industry believes that considering Lime's involvement in operational fraud, it will be impossible to avoid severe penalties such as license revocation or business suspension.

The Financial Supervisory Service's Dispute Mediation Committee for victims of the Lime incident is also expected to start operating as early as the end of this month. Currently, the Financial Supervisory Service has completed on-site investigations of the management company and sales companies and is conducting legal reviews of the overall Lime incident. For the Trade Finance Fund, which has effectively incurred a total loss, a mediation plan to refund up to 100% of the invested principal is expected to be submitted to the Dispute Mediation Committee.

A Financial Supervisory Service official said, "Among the approximately 600 Lime-related complaints received, dispute mediation will proceed by selecting representative cases," adding, "The Trade Finance Fund, whose loss amount has been confirmed, will be the first target, and other funds will be discussed only after liquidation and confirmation of losses."

This content was produced with the assistance of AI translation services.