Homeplus submitted an application for the commencement of corporate rehabilitation proceedings at the Seoul Bankruptcy Court on the morning of the 4th to proactively respond to potential funding issues due to a credit rating downgrade.

A Homeplus spokesperson explained, "The credit rating was downgraded because many improvements, such as increases in online and offline sales and improvements in the liability ratio, were not sufficiently reflected in the credit evaluation announced on Feb. 28."

Credit rating agencies downgraded Homeplus's corporate notes and short-term bond credit ratings from "A3" to "A3-" on the 28th of last month. Korea Credit Rating Agency cited weakened profit-generating capability, excessive financial burden relative to cash generation capacity, and increased uncertainty about medium- to long-term business competitiveness as reasons for the downgrade.

As of Jan. 31, 2025, Homeplus's liability ratio and revenue for the previous 12 months were 462% and 7.462 trillion won, respectively, indicating a 1506% improvement in the liability ratio and a 2.8% increase in revenue compared to a year ago.

Additionally, the spokesperson noted, "As the credit rating has been lowered, there is a possibility of issues arising in terms of short-term funding, so we had to apply for rehabilitation proceedings today to alleviate the burden of short-term repayment," stating that this application for rehabilitation proceedings is a preventive measure.

Regardless of the application for rehabilitation proceedings, all operations of Homeplus's large stores, express services, and online channels will continue as usual.

When the rehabilitation proceedings commence, repayment of financial debts will be deferred, but general commercial debts to partners will be fully repaid according to the rehabilitation proceedings, and employee salaries will also be paid as usual. Homeplus's earnings before interest, taxes, depreciation, and amortization (EBITDA), which shows the company's cash flow, is 237.4 billion won for the previous 12 months as of Jan. 31, 2025, indicating a positive flow. The company explained that if the financial debt is deferred due to this rehabilitation decision, the financial burden will decrease, significantly improving future cash flow.

It is known that Homeplus generates about 100 billion won in surplus cash over a period of one or two months due to the nature of the retail industry, where most sales are made in cash.

Excluding rental liabilities that account for all remaining lease periods, Homeplus's actual financial liabilities, including working capital borrowings, are about 2 trillion won. Homeplus owns real estate assets worth over 4.7 trillion won, so it is expected that adjustments with financial creditors will not be difficult once the rehabilitation plan is finalized.

A Homeplus spokesperson said, "Despite the unreasonable regulations on large stores that have persisted for over 10 years, the shift to online purchasing channels due to the COVID-19 pandemic, and the rapid growth of major e-commerce companies such as Coupang and Chinese commerce, we have achieved three consecutive years of sales growth and are committed to improving operational performance." They added, "While we have inevitably applied for rehabilitation proceedings to prevent potential funding issues that may arise due to the credit rating downgrade, we believe that all employees, labor unions, and shareholders will come together to overcome this wisely."

Homeplus's major shareholder is MBK Partners, a private equity fund management firm. This year marks the 10th anniversary since MBK Partners acquired Homeplus. In 2015, MBK Partners purchased a 100% equity stake from Tesco for about 7.2 trillion won.