This article was published on March 5, 2025, at 12:39 p.m. on the ChosunBiz MoneyMove site.
Private equity fund manager MBK Partners has applied for corporate rehabilitation procedures for Homeplus, the second-largest supermarket in South Korea. The decision to make this unprecedented move, even amid a management dispute with Korea Zinc, is explained by the industry's view that it follows a strategic judgment for both reducing short-term repayment burdens and asset liquidity.
On the 5th, according to investment banks (IB) and the legal sector, the Seoul Bankruptcy Court made a decision to initiate corporate rehabilitation procedures for Homeplus. The court chose Samil as the investigator for debt estimation and decided to grant a comprehensive permit for the continuation of operations as requested by Homeplus. Generally, corporations undergoing rehabilitation procedures must obtain court approval for every expenditure for operating activities, but Homeplus can spend money autonomously.
The credit rating downgrade was a trigger for Homeplus to apply for corporate rehabilitation procedures, despite the stigma of being under court management. This is because securing refinancing funds has become difficult for Homeplus, which has been relying on corporate bonds and short-term bonds. An industry insider noted, "While it's not impossible to issue short-term bonds with an A3- rating, fewer investors will be willing to underwrite, making it unlikely to absorb the necessary volume for refinancing."
Homeplus secured funds through asset-backed securities (ABS) and lines of credit, among other means, using them for purchases and operating payments. Beyond borrowing from financial institutions, Homeplus raised operational funds through the issuance of electronic short-term bonds and commercial papers (CP). According to Homeplus, as of the day before, the borrowing scale was around 1.9 trillion won, including 1.2 trillion won from MERITZ Securities, 100 billion won from bank lines, 250 billion won in commercial papers, and 350 billion won from the liquidity of purchase debts.
MBK Partners has bought time through Homeplus's corporate rehabilitation procedures due to the basic comprehensive injunction imposed on companies under court management. This injunction prohibits enforcement or seizure for debts incurred prior to the initiation of corporate rehabilitation procedures. During Homeplus's corporate rehabilitation process, repayments of borrowings and interest will be postponed, and restructuring of existing debts will also be possible to a certain degree. For Homeplus, it means that it only has to repay employee salaries, taxes, and trading debts classified as public interest debts among its rehabilitation debts.
The industry assesses that MBK Partners has secured justifications for an exit in the long term. It is analyzed that they have obtained grounds for selling real estate assets, which faced difficulties due to opposition from the Homeplus union, through the corporate rehabilitation procedures. Typically, a repayment plan is established centered around an administrator appointed by the court, and for this Homeplus, the administrator is Kim Kwang-il, the vice chairman of MBK Partners. Under Kim's leadership, methods for repaying debts through the sale of Homeplus's assets are being created.
From the creditors' perspective, there is no reason to oppose the asset liquidity of Homeplus's real estate. This is because securing repayment through new borrowings is realistically impossible. A lawyer with experience as a chief judge of the Seoul Bankruptcy Court explained, "Most of Homeplus's real estate assets are under collateral trust agreements, and because collateral-trusted assets are not considered the debtor's property under the debtor rehabilitation law, they do not affect the rehabilitation process," adding, "It means that disposition is possible through negotiations between creditors and the debtor without court approval." A significant portion of Homeplus's financial liabilities is secured against real estate assets amounting to 4.7 trillion won.
If MBK Partners fails to sell its real estate assets while maintaining its corporate rehabilitation process, the dilution of its equity is inevitable. This is because there is a high possibility that some of the existing debts will be converted into equity, and the existing shareholders' shares will be burned without compensation. Consequently, mergers and acquisitions (M&A) related to corporate rehabilitation are also expected to be excluded from options. An industry insider stated, "If Homeplus's management rights are sold according to the corporate rehabilitation procedures, new investors' funds will flow into the company in the form of paid-in capital, and the existing shareholders' shares will be burned," adding, "It is theoretically possible to terminate the rehabilitation process after selling real estate assets."
Meanwhile, Samil, the investigator for Homeplus, plans to submit a report to the court by the 29th of next month, estimating Homeplus's debt scale and corporate value. Once the scale of debts is confirmed, Homeplus's administrator will begin writing a rehabilitation plan for debt repayment.