Shinhan’s investment in HK’s K-pop fund faces redemption delay

Shinhan Investment has received a request to delay K-pop-related private equity fund redemption from a Hong Kong-based asset management firm due to underperforming entertainment business, according to industry sources Wednesday.

The brokerage unit of the Shinhan Financial Group invested 20 million euros ($21.7 million) in Royal China International Asset Management’s K-pop Showbiz Asia II Fund in April last year.

It was structured to earn profits from ticket sales by IME International, which organized K-pop concerts in Hong Kong. The total value of the private equity fund came to 40 million euros.

The fund’s maturity date was set for April 7, but Shinhan Investment was not able to receive its investment funds even a month later. Instead, the brokerage firm received a six-month maturity extension request from Royal China.

Hit by Hong Kong’s mass protests and the novel coronavirus outbreak, IME International failed to meet its profit demand from its planned concerts. The production agency then reinvested the ticket sales profits in another show, but it incurred further losses, the source said.

With the entertainment industry especially hit hard by the pandemic, Shinhan Investment might lose its investment. However, the brokerage firm said that it will prevent investors’ losses by establishing security on the production agency’s assets, including stocks.

“There was no problem with the PEF, when we received a report from Royal China by the end of March. Currently, we’re reviewing what triggered the redemption delay,” a Shinhan Investment official said.

“When the K-pop fund was structured, IME International had guaranteed its payment. Once we receive a repayment plan from it, we’ll come up with effective countermeasures on the matter, such as by executing security.”

By Jie Ye-eun (yeeun@heraldcorp.com)