Korea Pizza Hut said on the 26th that on the 25th of this month it received court approval from the Seoul Bankruptcy Court to transfer business before approval of a rehabilitation plan under Article 62 of the Debtor Rehabilitation and Bankruptcy Act.
Korea Pizza Hut said the decision granted prior approval to transfer business before the meeting of interested parties, which is meaningful in that it increases predictability of future proceedings and secures business continuity.
After signing a conditional investment contract (stalking horse) for M&A (mergers and acquisitions) in Dec. last year, Korea Pizza Hut selected the final preferred buyer in Jan. this year through an open competitive bid.
Then, on the 12th of last month, it held a briefing session for creditors and other stakeholders, explained a plan to transfer business rights to PH Korea, and to use the proceeds to repay administrative claims and rehabilitation claims.
With this court approval, uncertainty tied to whether creditors would consent has been minimized, and franchise networks and brand value can be maintained regardless of whether the rehabilitation plan is approved.
Going forward, the process will be finalized through a meeting of interested parties and court approval after closing the business transfer agreement, including payment of the sale price arising from the transfer, and preparing a rehabilitation plan reflecting it.
The existing Korea Pizza Hut corporation will proceed with liquidation along with debt repayment. Overall, Korea Pizza Hut expects the rehabilitation process to wrap up as existing franchise operations are maintained and repayments to creditors are made using the business transfer proceeds as funding.
A Korea Pizza Hut official said, "We kept the process transparent by conducting an open competitive bid during the transfer of business rights and actively gathered stakeholders' opinions at last month's briefing," adding, "In line with the Seoul Bankruptcy Court's decision, we plan to move quickly on the business transfer to secure funds for creditor repayment and to protect the franchise network."
Earlier, Korea Pizza Hut pursued a plan to transfer business-related assets and business rights to a newly established corporation, PH Korea, joined by Winter Gold and K Clavis Investment. The transaction is an "M&A before approval" method that transfers business-related assets and business rights to a third party, with the existing corporation settling debt and the new corporation taking over operations.
A Korea Pizza Hut official added, "With this prior court approval, concerns over business suspension—the biggest variable in the rehabilitation process—have been removed, creating a foundation to implement a stable closure structure that considers franchisees, employees, and creditors alike," and said, "We will rebuild the operating system around PH Korea and push step by step for brand normalization and profitability recovery."