[Inside Chodong] Homeplus on Borrowed Time, Clinging to Lifeline Funding

1 Year and 2 Months into Rehabilitation Proceedings
Worsening Product Shortages and Delayed Employee Salaries

Court Again Extends Approval Deadline for Rehabilitation Plan
as Express Division Sale Proceeds

Appealing for Financi

The situation at Homeplus, which entered corporate rehabilitation proceedings (court receivership) one year and two months ago, continues to deteriorate. While major hypermarket competitors offer 30,000 to 40,000 stock keeping units (SKUs), most Homeplus stores have filled the majority of their shelves with private brand (PB) products, except for some processed foods. In some stores, plastic side dish containers are sold in refrigerated sections that once displayed fresh foods, and plates and bowls are stacked on counters that used to sell seafood. Since the beginning of this year, employee salaries have not been paid on time, with delays of over a month, and even then, the payments have been split.

Homeplus store in Seoul. Photo by Yonhap News

In this situation, the Seoul Bankruptcy Court, which is overseeing Homeplus’s court receivership, recently extended the deadline for the approval of Homeplus’s rehabilitation plan once again. The rehabilitation plan is a written document submitted to the court by the debtor, outlining how and in what manner the debts will be repaid. Based on this plan, the court decides whether it is more valuable for the business under court receivership to continue rather than be liquidated, and thus determines whether to approve the plan.

The initial deadline of March 4 was postponed twice, each time by two months, and is now set for July 3. The court decided that it was necessary to monitor the situation until the sale process of the Homeplus Express division, the company’s supermarket business, is completed, as the sale is currently underway.

After entering corporate rehabilitation on March 4 last year, Homeplus presented a draft of the so-called 'structural innovation-type rehabilitation plan' on December 29 last year, following five extensions. The plan includes selling off Homeplus Express, closing 41 underperforming stores over the next six years, and pursuing workforce optimization.

Currently, NS Shopping, a home shopping business under Harim Group, has been selected as the preferred bidder for the acquisition of Homeplus Express and is negotiating detailed contract terms. Additionally, as part of its plan, Homeplus closed 17 stores by early this year and reduced its workforce by around 3,400 employees through voluntary retirement and other means as of early last month. In March, the main shareholder, MBK Partners, injected a total of KRW 100 billion in emergency operating funds (DIP financing).

A Homeplus Express store in downtown Seoul. Photo by Yonhap News

Despite these self-rescue measures, Homeplus is finding it difficult to maintain even basic business operations and is clinging to outside support, describing it as its last chance for survival. The company has repeatedly urged its largest creditor, Meritz Financial Group, to provide a bridge loan (short-term temporary financing) and DIP financing to address the short-term liquidity gap, leveraging the fact that the sale of the Express division is ongoing. Homeplus has also pledged that, once emergency operating funds are secured, it will overcome the liquidity crisis and seek understanding and support from all stakeholders through consultation.

As Homeplus employees hope, building consensus among stakeholders must come first to safeguard the livelihoods of nearly 100,000 people, including employees, their families, partners, and in-store vendors. However, the divided labor union continues to voice different opinions on major decisions, and those harmed by Homeplus's subordinated receivables, such as credit card payment-backed asset-backed short-term bonds (ABSTB), are pushing back. They have warned that if Meritz Financial Group pushes ahead with DIP financing without protecting subordinated creditors, they will pursue all legal avenues, including filing criminal complaints for breach of fiduciary duty, petitions, requests for regulatory investigation, and raising the issue in the National Assembly.

How well has management kept its promise, made 14 months ago, to "repay all debts responsibly and ensure that no one is harmed by the rehabilitation process"? Before the desperate demands for public restructuring oversight or capital injection, Homeplus labor and management—who are now surviving on borrowed time—must reflect on this issue.

This content was produced with the assistance of AI translation services.