Homeplus fails to secure 200 billion won, faces bankruptcy proceedings

Homeplus, once the second-largest supermarket chain in South Korea, is on the verge of bankruptcy after failing to secure the necessary 200 billion won (approximately $145 million) for its corporate rehabilitation. The Seoul Rehabilitation Court announced on Friday the termination of its rehabilitation proceedings, citing the "infeasibility" of its proposed recovery plan, including any revised versions.

Homeplus had initially proposed a plan in December to raise 300 billion won in emergency debtor-in-possession (DIP) financing. While 100 billion won was secured, the company could not raise the remaining 200 billion won needed for operational expenses and overdue supplier payments. The court's decision was based on the lack of concrete and realistic funding plans presented by Homeplus and its largest shareholder, MBK Partners.

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The rehabilitation plan, including the revised version, has no feasibility.

Despite the termination, the court has left a narrow path for rehabilitation. Homeplus has 14 days to raise the 200 billion won and file an immediate appeal. If successful, the Seoul Rehabilitation Court could cancel the termination and resume the proceedings. However, the possibility of securing additional funds appears dim, as major stakeholders remain at odds.

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Despite the pleas of numerous stakeholders over the past few weeks, Meritz Financial Group, the largest creditor, is refusing to provide funding, stating that the 100 billion won in joint guarantees from the major shareholder's operating manager, MBK Partners, and partner Kim Byung-ju, is insufficient.

Homeplus stated that its largest creditor, Meritz Financial Group, has refused to provide further financial support, deeming the 100 billion won in joint guarantees from MBK Partners and its managing partner, Kim Byung-ju, insufficient. Meritz countered that it had already provided maximum support within legal bounds, including a grace period for collateral execution and early payment cooperation for trade payables, and that Kim Byung-ju has not yet guaranteed the 100 billion won DIP finance provided by Meritz.

Industry observers are skeptical about Homeplus's経営 normalization even if it secures the additional funds. The amount is considered the minimum needed to cover back payments and operating costs, and it remains uncertain whether suppliers, who suffered from delayed payments, will resume business. MBK Partners' plans to sell Homeplus after normalizing its operations also face uncertainty, given the sluggish offline retail market. If Homeplus is liquidated, it could lead to significant social repercussions, including financial difficulties for small and medium-sized suppliers, job losses, and a decline in local economies.

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We have done our utmost as a creditor within the scope permitted by law, including deferring the execution of collateral rights, cooperating with early payment of trade receivables, and depositing 100 billion won in DIP financing into escrow. Chairman Kim Byung-ju has not yet guaranteed the 100 billion won in DIP provided by Meritz.