Will the Stalemate Break in Homeplus Rehabilitation Now in Meritz's Hands?

Meritz: "Personal Guarantee from MBK Chairman Kim Byungju Also Required"

Consistent Stance Since Homeplus DIP Request

MBK Offers Corporate and Vice Chairman Kim Gwangil's Guarantees

Meritz Financial Group, a key variable in the Homeplus rehabilitation process, is reviewing support for a Debtor-in-Possession (DIP) financing loan. This comes as MBK Partners, the private equity fund (PEF) operator, has offered a 100 billion won joint guarantee and political pressure has continued to mount. However, Meritz is presenting stringent guarantee conditions, which suggests that the negotiations are likely to face difficulties. Some in the market have raised concerns that Meritz may actually prefer liquidation, citing previous cases where the group benefited from the restructuring of troubled project financing (PF) sites.

According to the investment banking (IB) industry on June 12, the Euljiro Committee of the Democratic Party of Korea and the MBK Homeplus Task Force (TF) paid a protest visit to Meritz Securities. The Democratic Party met with Kim Jongmin, CEO of Meritz Securities, to convey the necessity of DIP financing. Meritz stated that they are reviewing the specific guarantee conditions and considering loan support, but emphasized that a personal guarantee from MBK Partners Chairman Kim Byungju is required.

Since the end of April, when Homeplus requested a short-term bridge loan from Meritz, its largest creditor, Meritz has repeatedly stated that guarantees are required from both the MBK corporation and Chairman Kim personally. Even last month, when MBK Partners Vice Chairman Kim Gwangil expressed his willingness to provide a personal joint guarantee, Meritz rejected the offer for the same reasons. On June 10, MBK promised a 100 billion won joint guarantee in the corporation's name.

The reason Meritz is relatively relaxed about the rehabilitation plan lies in the collateral structure. Meritz Financial Group participated in a 1.3 trillion won Homeplus refinancing deal in 2024 with a three-year maturity. At that time, the refinancing was secured by 62 Homeplus stores at interest rates of 11.5% to 14% per year. Even if DIP financing is provided, Meritz can still benefit. First, the proceeds from the sale of Express stores can be used for repayment. Additionally, DIP interest rates remain high, in the 6% range.

However, some in the market suggest that Meritz may actually be hoping for the liquidation of Homeplus. They argue that going through an uncertain rehabilitation process only prolongs the loan repayment period without real benefit to Meritz, whereas liquidation would allow Meritz to quickly cash out its 1.3 trillion won senior secured claims on the store collateral. After Homeplus entered court receivership, Meritz filed a rehabilitation claim with the court that includes not only the principal amount but also statutory interest, overdue fees, and extension fees, resulting in a claim amount that exceeds the original principal.

It is also noteworthy that Meritz has previously profited from the restructuring of troubled PF project sites. At a press conference the previous day, Democratic Party lawmaker Yoo Dongsoo stated, "Meritz shifted the losses from the failed Yeoksam-dong mixed-use development project onto the parent company and subordinated creditors while making enormous profits. If Meritz repeats such predatory lending practices, we will not stand idly by."

This refers to the Yeoksam-dong mixed-use development and the Gasan W Mall cases. At that time, Meritz proceeded with a public auction despite opposition and injunction requests from other creditor groups when signs of distress appeared at the project sites. As a result, Meritz recovered both the principal and fees, but mid- and lower-ranking creditors reportedly suffered losses. Subsequently, after asset prices plummeted due to the auction, Meritz found new buyers, provided new senior loans, and collected arrangement fees and interest. An investment banking (IB) industry source commented, "Setting aside the various socioeconomic repercussions, the fastest way to realize the 1.3 trillion won in senior claims is to ultimately reject the rehabilitation plan and send Homeplus into bankruptcy."

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