[Exclusive] 'Liquidity Crisis Theory' Sae Han Changtu, LPs Angry Over Reckless Investments

Borrowing Money Using Dunamu and Toss Stocks as Collateral to Invest in 'Kim Tae-ho PD and Teddy'
Unable to Repay Private Loans but Executing 'High-Value' Investments
Possibility of GP Corporation Liquidation in Worst Case
Private LPs Participating in Fund 'Headache'

[Asia Economy Reporter Kwangho Lee] Saehan Startup Investment, known as a "silent powerhouse" in the venture investment market, is facing conflicts with its fund limited partners (LPs) due to reckless investments. This is because it borrowed money using stocks it held as collateral to make corporate investments at high valuations while struggling to repay bonds maturing soon. In response, LPs have expressed strong dissatisfaction with the reckless investments made without resolving the liquidity crisis.

According to the investment banking (IB) industry on the 10th, Saehan Startup Investment is soon expected to face difficulties in repaying maturing bonds. The 80 billion KRW unsecured senior bonds issued on November 17 last year are due on the 17th, but it is reported that the repayment funds have not been secured. An IB industry insider said, "In a tight capital market, they are reaching out to various companies to borrow funds for bond repayment, but as far as I know, they have not yet secured the repayment funds."

Meanwhile, Saehan Startup Investment recently disbursed investment funds to ‘TEO,’ a content production company founded by former MBC PD Kim Tae-ho, and ‘The Black Label,’ a music and acting management company established by Park Hong-jun (Teddy), a former producer at YG Entertainment and member of the group One Time. TEO was valued at 100 billion KRW, and Saehan invested 10%, or 10 billion KRW. For The Black Label, they bet 42.5 billion KRW at a valuation of 150 billion KRW. It is known that Kakao had considered investing in TEO but eventually gave up. Saehan Startup Investment then participated alone to close the deal.

The industry questions the very fact of investing at such valuations. Saehan Startup Investment assigned a valuation of 100 billion KRW to TEO, which was only 10 months old at the time of investment. Even considering a premium for famous personalities, this is seen as an excessive valuation. The general sentiment among LPs is that the 150 billion KRW valuation for The Black Label is also difficult to accept.

The bigger issue is the source of the investment funds. Saehan Startup Investment secured investment capital by pledging shares of Dunamu (Upbit) and Viva Republica (Toss) as collateral because it had no funds to invest. The Dunamu and Toss shares were originally invested in by issuing bonds last year. All 215,000 shares of Dunamu and all 1,244,144 shares of Toss held were pledged as collateral. The combined value of Dunamu and Toss shares, which was about 230 billion KRW at the time of investment, has recently plummeted to around 85 billion KRW.

An IB industry insider said, "The maturity of the financial bonds is imminent, and to repay them, the priority is to use the funds obtained through stock-collateralized loans to pay off the debt," adding, "It is hard to believe that they made reckless investments at high valuations under these circumstances." An LP involved in the fund managed by Saehan Startup Investment pointed out, "It is a rare case for a VC to make investments using full leverage (borrowing the maximum amount of funds)," and questioned, "Was it necessary to make such investments even by pledging shares from other investment portfolios as collateral?" They added, "If the money is not repaid by maturity, in the worst case, corporate liquidation could be feared," and said, "How can LPs trust this general partner (GP) going forward?"

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