Homeplus Co. is effectively set to enter bankruptcy (liquidation) after a court decision to terminate its corporate rehabilitation proceedings. The final variable for rehabilitation is securing 200 billion won in operating funds. If the funds are secured within 14 days and an immediate appeal is filed, the rehabilitation proceedings could resume, but if that fails, losses for stakeholders, including employees, partner and supplier companies, and store tenants, will likely be unavoidable.
Homeplus Co. on the 3rd requested again that Meritz Financial Group, its largest creditor, provide operating funds immediately after the court's decision to terminate the rehabilitation proceedings. In a statement, the company said, "The court said that if we secure 200 billion won in operating funds within two weeks and file an immediate appeal, a remedy can be devised, meaning the rehabilitation proceedings can resume," and stated accordingly.
Homeplus Co. said, "Despite pleas from numerous stakeholders over the past few weeks, Meritz Financial Group is refusing to provide funding, saying a 100 billion won joint guarantee offered by MBK Partners and Chairman Kim Byung-ju is not enough," and added, "We implore Meritz Financial to support a 200 billion won operating loan."
It continued, "We have pursued self-rescue efforts such as negotiating rent reductions for stores, suspending operations at some locations, and selling Homeplus Express, but in the course of rehabilitation, disruptions in product supply occurred and sales kept falling," and said, "Without operating funds, it was difficult to dispel doubts about the feasibility of executing the rehabilitation plan."
Homeplus Co. entered corporate rehabilitation proceedings in Mar. last year due to a cash crunch and has carried out intensive restructuring, including store reductions and voluntary retirements. At the start of the proceedings, there were 126 hypermarkets, which were reorganized around 67 core stores, and the workforce fell from about 18,000 to around 9,000. However, after failing to secure 200 billion won in operating funds, a key condition for rehabilitation, it ultimately faced the risk of liquidation.
Meritz Financial has expressed willingness to provide 100 billion won to support Homeplus Co.'s rehabilitation, but says guarantees and additional funding burdens by the major shareholder MBK Partners and Chairman Kim Byung-ju must come first. Homeplus Co. and MBK, on the other hand, argue that Meritz, the largest creditor holding collateral, should provide the 200 billion won needed for rehabilitation, prolonging the dispute over who is responsible for securing the funds.
The Seoul Bankruptcy Court reviewed Homeplus Co.'s revised rehabilitation plan submitted on the 30th of last month and determined it lacked feasibility. With sales declining and public-interest claims increasing, and considering that the minimum 200 billion won in operating funds to carry out the plan had not been secured, the court terminated the proceedings without holding a creditors' meeting.
However, this decision does not immediately finalize bankruptcy. Homeplus Co. can file an immediate appeal within 14 days. If operating funds are secured within that period, the court could overturn the termination and resume the rehabilitation proceedings.
If Homeplus Co. proceeds to liquidation, the impact on employment and partner companies is expected to be significant. Jobs for about 10,000 indirectly employed workers, including parking and cart management and cleaning, as well as Homeplus employees, could be at risk. Store tenants, suppliers, and investors in Homeplus commercial paper also face concerns of a chain reaction of damage.
If operations at Homeplus Co. stores, which have served as key customer-drawing facilities in major commercial districts nationwide, are disrupted, the impact on local business areas is also expected to be considerable. Observers say that because Homeplus has functioned not just as a hypermarket but as a hub facility tied to daily-life businesses such as restaurants, hair salons, dry cleaners, pharmacies, and cafes, surrounding commercial areas could also be shaken.
Homeplus Co. added, "We will actively cooperate with the legal procedures to come and do our best to minimize damage to stakeholders, including creditors and employees," and said, "We once again deeply apologize to customers, executives and employees, and stakeholders who supported our rehabilitation."