Homeplus Co., which is undergoing corporate rehabilitation, has failed to come up with a feasible plan to secure 200 billion won in funding, raising the likelihood of liquidation. In this situation, some large supermarkets near Homeplus Co. stores where operations were suspended are seeing double-digit sales growth as a spillover effect materializes. The impact is expected to spread to online retailers and convenience stores, especially as brick-and-mortar supermarkets have lost ground.
According to the legal and retail sectors on the 28th, the court ordered Homeplus Co. to submit its opinion on the termination of rehabilitation proceedings by the 30th. Accordingly, Homeplus Co. must draw up a feasible plan to secure an additional 200 billion won in funding, but Meritz Financial Group and MBK Partners have failed to bridge their differences in related talks.
Because the court's order implies it will terminate the proceedings if a feasible financing plan is not prepared by the 3rd, the deadline for approval of the rehabilitation plan, the industry is leaning toward the possibility of Homeplus Co. being liquidated. If Homeplus Co. fails to submit a feasible financing plan, it is expected to enter bankruptcy proceedings.
At present, the debate has devolved into a blame game between Meritz Financial Group and MBK Partners. The original rehabilitation plan called for MBK Partners to provide 100 billion won and for 100 billion won each to be raised from Korea Development Bank (KDB) and Meritz Financial Group, but both KDB and Meritz declined. Afterward, Homeplus Co. spun off and sold its Express division to NS Home Shopping and requested 200 billion won in funding support. In response, Meritz has maintained conditions such as requiring MBK to shoulder the remaining 100 billion won. Meritz says 100 billion won has been placed in an escrow account, and MBK should take responsibility for the rest.
Homeplus Co. says MBK has provided both credit and resources to the limit. It argues that directly adding another 100 billion won is practically impossible. It further contends that Meritz, despite knowing this, made the proposal to create justification to refuse a loan. On the 26th, Meritz also posted a "letter to shareholders" on its website, saying the support amount remains capped at 100 billion won, in line with its existing position.
In this situation, demand is shifting away from Homeplus Co. Since 37 Homeplus Co. stores suspended operations on the 10th of last month, sales have risen at nearby E-MART and Lotte Mart outlets. E-MART said sales at its Chang-dong and Muk-dong stores from the 10th to the 31st of last month increased 11.4% from a year earlier. That is roughly more than double the 5.2% growth rate for E-MART's comparable-store sales overall.
Lotte Mart also saw sales at stores near Homeplus Co. closures in Seoul rise 9% from a year earlier. During the same period, one Lotte Mart in Songpa District recorded a 24% year-over-year increase. However, given that structural growth in the hypermarket sector remains limited, some say the effect of Homeplus Co. closures could be dispersed to online retailers and convenience stores. Last month's retail sales show department stores (24.5%), convenience stores (5.9%), and online (8.8%) increased, while hypermarkets (-5.1%) and SSMs (-8%) declined.
The industry expects the retail market to be reshaped depending on Homeplus Co.'s final disposition. If liquidation or further store rationalization at Homeplus Co. materializes, competition to attract customers among hypermarkets, convenience stores, and online channels is expected to intensify.
Meanwhile, during the rehabilitation process, the number of directly employed Homeplus Co. workers fell from around 20,000 to about 15,000. Including partner companies, roughly 100,000 livelihoods are entangled, according to the Homeplus Co. labor union. Unsettled payments owed to small and midsize Homeplus Co. suppliers reportedly average 774 million won. If Homeplus Co. proceeds to liquidation, the economic and social fallout is expected to be significant.