With the corporate rehabilitation proceedings abolished, Homeplus Co.'s bankruptcy has effectively entered the final countdown. Homeplus Co. declared a temporary shutdown of all 67 stores, including its headquarters, starting on the 13th. It cited the exhaustion of operating funds and difficulty maintaining and managing facilities. If Homeplus Co. fails to secure at least 200 billion won in operating funds by the 20th, the deadline for immediate appeals, it will move to liquidation.
Attention has shifted in two directions. How the bankruptcy will be declared, and where the last remaining prime stores will go. Some Chinese e-commerce firms operating in Korea are also reportedly interested in these stores.
◇ Not a general bankruptcy but "connected bankruptcy" carries weight
According to related industries, Homeplus Co. is likely to pursue "connected bankruptcy (牽連破産)" rather than general bankruptcy. Connected bankruptcy is a process in which, to prevent a corporation whose rehabilitation has been halted from being left unattended, the court declares bankruptcy ex officio at the same time as the termination of rehabilitation, or accepts the corporation's application to do so. Homeplus Co. said it has not yet decided whether to file for direct bankruptcy by the end of this week.
The crux is the priority of public-interest claims. In connected bankruptcy, the legal status of public-interest claims accrued during the rehabilitation period remains intact. By contrast, if a separate general bankruptcy proceeding is pursued after the appeal period ends and the termination is finalized, creditors must file their claims again, and in that process the order of repayment can become tangled. A representative of one creditor said, "If it goes to general bankruptcy, even things like unpaid wages for employees can get jumbled in order, which could end up harming public-interest creditors," adding, "To prevent such major confusion, won't they opt for connected bankruptcy?" In previous bankruptcies of distribution corporations such as WEMAKEPRICE INC., the court also proceeded with connected bankruptcy procedures to protect public-interest creditors.
Homeplus Co.'s public-interest claims are estimated at 1 trillion won. A large portion consists of payments to partner suppliers and unpaid wages and severance for employees that arose after the commencement of rehabilitation proceedings. This also includes compensation claims for losses suffered by store owners that had opened in the Homeplus Co. mall who can no longer operate due to the bankruptcy.
◇ The ball is with Meritz… Who will buy the prime stores
Sixty-two Homeplus Co. stores are held in a security trust with Meritz Financial Group. In May 2024, three Meritz affiliates lent 1.2166 trillion won to Homeplus Co., placing these stores in trust and securing first-priority preferred beneficiary rights. Assets in a security trust stand outside the disposition process of the bankruptcy estate, allowing the creditor to independently decide when and at what price to sell. Even if the court appoints a bankruptcy trustee after declaring bankruptcy, the 62 stores will be handled in consultation with Meritz. Homeplus Co. estimates this accounts for about 99% of its assets.
In the investment banking (IB) industry, the view is that Meritz will pursue a "selective sale," picking only high-quality stores to sell. Profitable prime stores would be bundled and transferred to a retailer or major developer, while the remainder that do not sell would be disposed of through individual auctions. Instead of a business transfer that carries the burden of employment succession, Meritz is seen as likely to choose a purchase and assumption (P&A) structure that selectively acquires only quality assets and liabilities.
There is also speculation that store sites will be developed into mixed-use complexes, offices, or logistics centers. However, because rezoning and development take years, it is more likely that, rather than Meritz moving directly to recoup principal quickly, a buyer that acquires the land will take charge of development.
◇ E-MART and Lotte Mart to "share the pain"?… Is Ali also a candidate?
Competitors are first up as acquisition candidates. E-MART and Lotte Mart would split some stores that do not overlap in trade areas in a "share the pain" approach. The two companies are also the biggest beneficiaries of Homeplus Co.'s closures. According to Hana Securities, as 59 Homeplus Co. stores shut down, sales at E-MART and Lotte Mart stores within the affected radius increased by about 10%. It also analyzed that if Homeplus Co. shuts down completely, E-MART could add 55 billion won and Lotte Mart 20 billion won in operating profit annually. That corresponds to 18% and 4%, respectively, of last year's consolidation operating profit.
Chinese e-commerce players eyeing logistics hubs are also being mentioned. For an overseas company to enter Korea's retail market from scratch is not cheap, and buying an already established store network could be the more rational choice. The name that comes up most often is AliExpress. It was previously floated as a potential buyer for Homeplus Express as well, and the fact that parent Alibaba's fresh-food chain "Hema Fresh (盒馬鮮生)" in China operates in a similar structure is cited as a basis. Hema Fresh stores function as urban logistics hubs.
Ali's weakness in fresh food also ties in. In the brand special sale held from the 8th to the 10th of this month, the top categories by transaction amount were car accessories, audio equipment, and outdoor gear, with all top-10 items being manufactured goods. There is also a limit in that it relies on domestic logistics partners such as CJ Logistics and Hanjin.
Still, it is uncertain whether the sale will proceed smoothly. As grocery demand has already shifted to e-commerce, the hypermarket format itself is shrinking. An industry official said, "In a situation where the hypermarket industry is experiencing ups and downs, it is questionable how much incentive remains to newly enter a market where the No. 1 and No. 2 players are holding firm."