Homeplus Co. has launched a second round of restructuring focused on hypermarkets and online operations following the signing of a sale agreement for its supermarket division, "Homeplus Express." The move reflects an assessment that proceeds from the supermarket sale alone will not be enough to secure the funds needed for rehabilitation.
Homeplus Co. said on the 8th that starting on the 10th of this month through July 3, it will temporarily suspend operations at 37 underperforming stores out of its 104 hypermarkets for about two months and concentrate operations on the remaining 67 locations.
Stores with operations temporarily suspended are the Junggye, Sinnae, Myeonmok, and Jamsil stores in Seoul; the Centum City, Busan Banyeo, Yeongdo, and West Busan stores in Busan; the Sangin store in Daegu; the Gajwa, Sungui, Yeonsu, Songdo, and Nonhyeon stores in Incheon; the Kintex, Goyang Terminal, Pocheon Songu, Namyangju Jinjeop, Gyeonggi Hanam, Bucheon Sosa, Bundang Ori, and East Suwon stores in Gyeonggi; the Gyeryong store in South Chungcheong; the Iksan and Gimje stores in North Jeolla; the Mokpo and Suncheon Pungdeok stores in South Jeolla; the Gyeongsan, Pohang, Pohang Jukdo, and Gumi stores in North Gyeongsang; and the Miryang, Jinju, Samcheonpo, Masan, Jinhae, and Gimhae stores in South Gyeongsang.
Employees at stores where operations are suspended will receive furlough pay equal to 70% of their average wages. Those who wish to continue working will be reassigned to other stores that remain open. However, the shopping mall (mall) within the affected stores will continue to operate, allowing tenant businesses to keep trading.
Earlier, Homeplus Co. signed a contract the previous day with NS Shopping, an affiliate of Harim Group, the preferred bidder for the Express sale. Homeplus Express has total assets of about 317 billion won and net worth of about 146 billion won, according to reports. The cash Homeplus Co. will secure from this transaction is about 120.6 billion won. However, because it will take time for the sale proceeds to come in, the company needs additional funding to carry out short-term operations and its rehabilitation plan.
The company asked Meritz Financial Group, its largest creditor, to provide a bridge loan and DIP (debtor-in-possession) financing during the rehabilitation process, but it has not yet received a clear response, according to reports. Meritz has extended loans of about 1.2 trillion won, taking 68 Homeplus Co. stores and real estate worth about 4 trillion won as collateral.
A Homeplus Co. official said, "All funds secured through the sale of assets such as real estate are being used to repay Meritz loans, making it difficult to secure even minimal operating funds." The official added, "Without funding support from Meritz, which holds virtually all cashable assets as collateral, rehabilitation is impossible."
Homeplus Co.'s performance has been deteriorating since entering rehabilitation proceedings. As major suppliers tightened transaction terms or reduced volumes, sales fell sharply. At some stores, a shortage of products led to customer defections, with sales dropping more than 50% from a year earlier.
Homeplus Co. is preparing a revised rehabilitation plan reflecting creditor demands. The revision will include measures to streamline store operations, plans to suspend operations at certain stores, and M&A of the remaining business divisions. The company plans to pursue M&A of the remaining business divisions in parallel even before court approval of the rehabilitation plan.
A Homeplus Co. official added, "Through this second round of restructuring, we will improve the business viability of the remaining business divisions—hypermarkets, online, and headquarters—and then sell them to a third party to repay unpaid claims and complete the rehabilitation process."