Homeplus Co. again asked Meritz Financial Group to support a bridge loan worth around 100 billion won, proposing a performance guarantee plan under which it would repay immediately when proceeds from the sale of Homeplus Express flow in. But Meritz is taking issue with the fact that the guarantor is only Vice Chairman Kim Gwang-il of MBK Partners personally, and the two sides' differences do not appear to be fully resolved.
According to the investment banking (IB) industry on the 21st, Homeplus Co. again asked Meritz on the day to lend, as a bridge loan, the operating funds needed for a month, secured by the proceeds from the sale of Homeplus Express.
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 Meritz with additional collateral options.
This decision by Vice Chairman Kim to provide a performance guarantee was made at Meritz's request. Previously, as a condition for providing a bridge loan to Homeplus Co., Meritz had demanded immediate early repayment when the Homeplus Express sale proceeds come in, and that MBK Partners and key executives provide joint and several guarantees to collateralize this.
Homeplus Co. said, "We proposed every possible option," and emphasized, "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 this performance guarantee by the vice chairman.
A Meritz official said, "Putting forward only Vice Chairman Kim, the rehabilitation administrator of Homeplus Co., as the guarantor, rather than MBK Partners, the major shareholder, means that MBK Partners and Chairman Kim Byung-ju will take no responsibility," adding, "It is an irresponsible and unacceptable proposal."
The official added, "Meritz's request for MBK Partners, the major shareholder, to provide a performance guarantee for the bridge loan is a minimum measure essential to prevent breach of duty and persuade shareholders."
As Homeplus Co. and Meritz failed to narrow their differences over the conditions for providing the bridge loan, discussions have returned to square one.
Homeplus Co. is now in such a difficult situation that it cannot even pay employees' wages. A Homeplus Co. official said, "Today (the 21st) is Homeplus's May payday, but we only paid part of April's wages, and we are also facing serious difficulties in supplying goods," adding, "The bridge loan is essential funding for Homeplus to overcome the immediate challenges it faces."
Meritz is demanding a performance guarantee not only from the vice chairman but also at the MBK Partners level, but MBK Partners says that is not realistic.
MBK Partners is already providing a payment guarantee of 200 billion won for Homeplus Co.'s debt. In addition, Chairman Kim and Vice Chairman Kim have provided 100 billion won through personal funds and personal joint 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 right of recourse.
An MBK Partners official said, "The performing party for the transaction of transferring the Homeplus Express business is Homeplus Co., not MBK Partners," adding, "Vice Chairman Kim, as its administrator and CEO, said he would personally bear the guarantee obligation."
The official added, "The benefits of this loan will also go to Meritz Financial, the largest creditor of Homeplus Co.," and appealed, "Do not belittle the efforts of Homeplus and its administrator in this desperate situation."