Homeplus Co. again asked Meritz Financial Group to provide a bridge loan worth in the 100 billion won range and proposed a performance guarantee plan under which it would repay immediately when proceeds from the sale of Homeplus Express come in. But Meritz is taking issue with the fact that the only guarantor is Vice Chairman Kim Gwang-il of MBK Partners in a personal capacity, leaving a sense that the gap between the two sides has not been fully bridged.
According to the investment bank (IB) industry on the 21st, Homeplus Co. again asked Meritz that day to extend a one-month bridge loan for needed operating funds secured by the proceeds from the sale of Homeplus Express as collateral.
Homeplus Co. said that, at Meritz's request, Vice Chairman Kim Gwang-il of MBK Partners would provide a performance guarantee. It was also reported to have presented additional collateral options to Meritz.
This decision by Vice Chairman Kim to provide a performance guarantee came at Meritz's request. Earlier, as a condition for providing a bridge loan to Homeplus Co., Meritz demanded immediate early repayment when proceeds from the sale of Homeplus Express come in, and joint guarantees by MBK Partners and key management that could secure this as collateral.
Homeplus Co. appealed, saying, "We proposed every possible option," and "We expect Meritz's positive review and immediate execution."
However, Meritz's position is that it is difficult to provide a bridge loan based solely on Vice Chairman Kim's performance guarantee.
A Meritz official said, "Putting forward only Vice Chairman Kim, the rehabilitation manager of Homeplus Co., and not MBK Partners, the largest shareholder, as the guarantor means MBK Partners and Chairman Kim Byung-ju do not intend to take any responsibility," adding, "It is an irresponsible and unacceptable proposal."
The official added, "Meritz's demand for MBK Partners, the largest shareholder, to provide a performance guarantee for the bridge loan is the minimum necessary measure to prevent breach of trust and to persuade shareholders."
As Homeplus Co. and Meritz failed to narrow their differences over the terms for providing the bridge loan, the discussion has returned to square one.
Homeplus Co. is currently in such difficulty that it cannot even pay employees' wages. A Homeplus Co. official said, "Today (the 21st) is Homeplus's May payday, but we paid only part of the April wages, and we are also facing major difficulties in product supply," stressing, "The bridge loan is essential funding for Homeplus to get through the immediate difficulties."
Meritz is demanding a performance guarantee at the MBK Partners level as well as from Vice Chairman Kim, but MBK Partners says that is not realistic.
MBK Partners is already providing a payment guarantee worth 200 billion won for Homeplus Co.'s debt. In addition, Chairman Kim and Vice Chairman Kim have provided 100 billion won through personal contributions of private funds and joint personal guarantees, and 100 billion won in the form of a DIP loan. In the process, Chairman Kim and Vice Chairman Kim put up their homes as collateral and waived their rights of recourse.