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Photo = Yonhap news |
[Alpha Biz= Paul Lee] Retail investors who invested tens of millions of KRW each in Lotte Insurance’s subordinated bonds issued in 2020 are now facing difficulties recovering their funds, as the early redemption (call option) on the bonds has failed.
According to data obtained from the Financial Supervisory Service by Democratic Party lawmaker Min Byung-deok and disclosed on May 27, retail investors hold approximately 75.6 billion KRW of the bonds—84.1% of the total issuance amount of 90 billion KRW.
Meritz Securities led the issuance and partially underwrote the bonds, which were then distributed to individual investors through various financial institutions including Korea Investment & Securities. Considering that about 20 billion KRW of the bonds were traded on the exchange, the number of affected retail investors is estimated to exceed 1,900.
Although the bonds have a 10-year maturity, it has become customary in the market to redeem subordinated bonds at the 5-year mark through a call option, effectively treating them as 5-year instruments. However, when the first early redemption date arrived on May 8, Lotte Insurance was unable to execute the call option due to a lack of approval from financial authorities, resulting in the missed redemption.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
