Homeplus Co. has secured 200 billion won in emergency operating funds under pressure from the political sphere, giving it a brief respite from the brink of bankruptcy. But there are still a series of follow-up steps left, including the court's granting of an immediate appeal, preparation of a revised rehabilitation plan, and creditor consent, and there remains significant uncertainty before operations can truly normalize.
On the 16th, Meritz Financial Group convened its board and reviewed and approved an agenda item to provide Homeplus Co. with 200 billion won in emergency operating funds (DIP). With the item's passage, Homeplus Co. secured funds to immediately appeal the court's decision to terminate rehabilitation proceedings.
Meritz Financial and MBK Partners had been at odds over loan terms and the scope of guarantees. Citing concerns about rehabilitation prospects and breach of trust, Meritz had drawn a line on additional funding on the condition of a joint guarantee by MBK Partners Chairman Kim Byung-ju, while MBK's position was that if Meritz lent the full 200 billion won, it could guarantee only 100 billion won of that amount.
The stalemate broke when MBK and Chairman Kim Byung-ju agreed to provide a joint guarantee for the full 200 billion won. Meritz will provide a direct joint guarantee for the entire loan amount. An MBK official said the decision was to "minimize damage to stakeholders, including the company, executives and employees, partner companies, suppliers, and tenant merchants."
In the retail industry, many see political pressure as having influenced the agreement. As concerns mounted over mass layoffs and a domino effect on partner companies due to Homeplus Co.'s business suspension, mediation gained momentum led by the Democratic Party of Korea, and the National Assembly had even slated a hearing on the "Homeplus Co. crisis" for the 27th. The labor union also kept up public pressure for funding support by holding a rally in front of Meritz Financial's headquarters and engaging with the Ministry of Employment and Labor (MOEL).
Min Byung-deok, head of the Democratic Party of Korea's Euljiro Committee, said at the "Homeplus Co. workers and merchants general rally" held in Seoul on the previous day that "the 200 billion won issue will be resolved by tomorrow," adding that "Homeplus Co.'s bankruptcy will be prevented and full-fledged rehabilitation will begin."
Still, approval by the Meritz board does not immediately mean rehabilitation. After securing the funds, Homeplus Co. must file an immediate appeal with the court. The immediate appeal will be filed on the 20th, close to the deadline, rather than on this day.
If the court accepts the immediate appeal, the rehabilitation process will continue until the final deadline of Sept. 4. Before then, Homeplus Co. must draw up a revised rehabilitation plan and obtain creditor consent. Even after that, restoring product supply and rebuilding trust with partners, among other steps, will be needed to normalize operations.
Even if rehabilitation proceedings resume, the possibility of bankruptcy is not completely off the table. If the revised rehabilitation plan fails to gain creditor consent or if the company fails to carry out the plan thereafter, it could once again enter bankruptcy proceedings. Conversely, if the immediate appeal is not accepted, Homeplus Co. will proceed toward liquidation.
Some argue that 200 billion won in emergency operating funds alone makes it difficult to expect management normalization. Homeplus Co.'s priority claims currently total about 1 trillion won. Priority claims are debts that must be repaid before general claims in rehabilitation proceedings. Priority claims have nearly tripled from 332.8 billion won in March last year, when rehabilitation began. Of that, trade payables such as unpaid delivery payments account for 794 billion won, making up most of the total, and taxes and public dues amount to 82 billion won.
Even after the capital infusion, many hurdles remain before normal business can resume. Since the 13th, operations at all 67 hypermarkets have been suspended, and as of June, Homeplus Co.'s wage arrears stood at 33.3 billion won, affecting roughly 11,400 employees due for payment. The company's monthly payroll is around 24 billion won, and the resumption of deliveries by partner firms, restoration of product assortment, and rebuilding consumer trust must also follow.
Lee Jeong-hee, a professor of economics at Chung-Ang University, said, "With the 200 billion won in support, immediate bankruptcy can be avoided and the most urgent fire can be put out, but legal rehabilitation and operational normalization are different matters," adding, "Suppliers must believe they can receive their transaction payments in full and on time for product supply to recover and for customers to return."
He added, "MBK needs to present a concrete plan on how it will normalize Homeplus Co., along with additional investment, in order to restore partner companies' trust."