(KFTC)

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The Korea Fair Trade Commission (KFTC) has launched a comprehensive investigation into alleged improper internal transactions between Homeplus Co., Lotte Card Co., and MBK Partners.

According to industry sources on Tuesday, the antitrust authority dispatched investigators to the headquarters of Homeplus, Lotte Card, and MBK Partners to collect documents and conduct on-site investigations.

Lotte Card and Homeplus are subsidiaries of MBK Partners, a private equity firm and their major shareholder.

The investigation aims to determine whether favorable transactions were made and to examine the flow of funds between the companies.

The KFTC is particularly looking into whether Lotte Card offered more favorable terms for corporate credit cards, such as higher credit limits, to Homeplus compared to other companies, raising suspicions of improper support for affiliates.

The authority is looking into whether Homeplus’s annual payments of over 100 billion won ($68.3 million) in interest-like dividends to a special purpose company established by MBK constitute improper internal transactions.

In 2015, MBK acquired Homeplus for 7.2 trillion won and took out a 5 trillion won loan in Homeplus’s name, part of which was raised through redeemable convertible preferred shares (RCPS) issued by Homeplus.

Meanwhile, HDC Holdings Co. is also under investigation by the KFTC over allegations that it lent 36 billion won to its affiliate, HDC Iparkmall Co., with minimal interest.

The companies are suspected of circumventing the law by using false lease agreements instead of a proper loan contract.