A Homeplus store in Seoul is seen on this photo taken on Sunday. Yonhap

Korea's financial watchdog said Thursday it has launched an inspection into financial institutions, including Shinyoung Securities Co., over various allegations related to discount store chain Homeplus Co.

On March 4, Homeplus entered court-led rehabilitation proceedings after Korea Investors Service and Korea Ratings Inc. lowered the rating of its corporate bonds to A3- from A3, citing the company's lack of efforts to improve its financial health.

Although Homeplus was notified by a credit rating agency on Feb. 25 that its rating was likely to decline, the company issued asset-backed short-term bonds (ABSTBs) worth 82 billion won (US$56.3 million) through Shinyoung Securities the same day.

ABSTBs are short-term bonds backed by future receivables as collateral.

The Financial Supervisory Service (FSS) said it will investigate Shinyoung Securities and the two ratings firms, focusing on whether the securities firm had issued the bonds while already aware of Homeplus' imminent credit rating downgrade.

"(We) will primarily look into when Shinyoung Securities became aware of the (financial) distress and if any sales or issuances were made at that point," a senior FSS official said, noting the regulator also needed to check information held by the credit rating agencies.

The official also said private equity firm MBK Partners, which owns Homeplus, could also face inspection if the current probe finds any signs of illegal activity, such as unfair transactions or fraud. (Yonhap)