Homeplus Co., which barely restarted rehabilitation proceedings by a court decision, is being accused of not repaying even the payments for goods delivered after the commencement of rehabilitation. Small and midsize manufacturers that have imported food ingredients from overseas, processed them, and supplied them to big-box retailers have been hit directly.
The Korea Importers Association on the 27th urged the government and the National Assembly to draw up emergency measures, saying, "Domestic food supply chains are under threat due to nonpayment of public-interest claims incurred during Homeplus Co.'s rehabilitation process." A survey of member companies found that the unpaid losses reported by 10 respondents totaled about 27.2 billion won. Of these, nine were food-related manufacturing corporations, and all nine said they are facing management crises such as delayed payments to overseas suppliers, production disruptions, and reduced employment.
The payments at issue are "public-interest claims," not ordinary trade claims. Under the Debtor Rehabilitation and Bankruptcy Act, they are debt incurred for a company to continue operations after a court commences rehabilitation, and must be repaid from time to time ahead of rehabilitation claims. It is a mechanism the law specially protects so that a rehabilitating company can continue to receive supplies. Even so, with a substantial portion of these payments not being made, cash flow at food ingredient supply corporations is worsening, the association said.
The association said, "The affected corporations are not simple importers but manufacturing corporations that process and produce overseas food ingredients domestically and supply them to big-box retailers," adding, "Their business deterioration could directly affect household food prices and the stability of the food supply chain." The association demanded three things: forming a pan-government emergency consultative body involving the government, the National Assembly, relevant ministries, and affected public-interest creditors; providing emergency business stabilization funds and low-interest loan support for more than 50% of verified public-interest claims; and establishing responsible repayment plans by key stakeholders, including majority shareholder MBK Partners and Meritz.
Homeplus Co.'s rehabilitation has recently been dramatically revived. The Seoul Bankruptcy Court on the 3rd of this month decided to discontinue the proceedings, citing a lack of feasibility in executing the rehabilitation plan, but after three Meritz Financial affiliates approved 200 billion won in debtor-in-possession (DIP) emergency operating funds, it canceled the discontinuation on the 21st and extended the deadline for approving the rehabilitation plan to Sept. 4. However, partner companies worry that because these funds are being prioritized for wages and store reopening expense, settlement of payments to suppliers could again be pushed back.