After signing a deal to sell its supermarket unit, "Homeplus Express," Homeplus Co. launched a second round of restructuring focused on its hypermarkets and online business. The company determined that the supermarket sale alone would not be enough to secure the funds needed for rehabilitation.
Homeplus Co. said on the 8th that from the 10th of this month through July 3, for about two months, it will temporarily suspend operations at 37 of its 104 hypermarket stores with low contribution and focus operations on the remaining 67 stores.
Employees at the 37 suspended stores will receive a furlough allowance equal to 70% of their average wages. Those who wish to work will be reassigned to other stores that remain open. However, the mall within the affected stores will continue operating, and tenant businesses can keep operating.
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's total assets are known to be about 317 billion won, with net worth of about 146 billion won. 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 its largest creditor, Meritz Financial Group, for support through a bridge loan and a DIP (debtor-in-possession) loan during the rehabilitation process, but it has not yet received a clear response. Meritz has provided about 1.2 trillion won in loans and holds as collateral 68 Homeplus Co. stores and real estate worth about 4 trillion won.
A Homeplus Co. representative said, "All funds secured through asset sales, including real estate, are being used to repay Meritz loans, making it difficult to secure even minimal operating funds." The representative added, "Without funding support from Meritz, which holds as collateral virtually all assets that can be liquidated, rehabilitation is impossible."
Homeplus Co.'s performance has been deteriorating since entering rehabilitation. Major suppliers strengthened transaction terms or reduced volume, causing a sharp drop in sales. At some stores, a shortage of goods led to customer attrition, pushing sales down more than 50% from a year earlier.
Homeplus Co. is preparing a revised rehabilitation plan reflecting creditor demands. The revision will include improving store operating efficiency, suspending operations at some stores, and M&A of the remaining business units. The company plans to pursue M&A of the remaining business units in parallel even before the rehabilitation plan is approved.
A Homeplus Co. representative added, "Through this second round of restructuring, we will improve the business viability of the remaining business units—hypermarkets, online, and headquarters—and then sell them to a third party to repay unpaid claims and complete the rehabilitation process."