Homeplus Fails to Secure 200 Billion Won, Rehabilitation Procedure Terminated...Effectively Faces Liquidation
Court Terminates Homeplus Rehabilitation Procedure
“14-Day Grace Period” Remains, but Survival Unlikely
“M&A Failure and Surge in Public Interest Claims”
Facing Risk of Liquidation
The corporate rehabilitation procedure (court receivership) for Homeplus, which has been facing a severe liquidity crisis, has ultimately been terminated due to its failure to secure essential operating funds. The company is now effectively facing the threat of liquidation.
The 4th Division of the Seoul Bankruptcy Court (Chief Judge Jung Junyoung and Presiding Judge Park Soyoung) announced on July 3 that it had decided to terminate Homeplus’s rehabilitation procedure, judging that there was no possibility of carrying out the rehabilitation plan. The court pointed out, "Although the sale of the Homeplus Express business division was completed, the merger and acquisition (M&A) of the remaining business units did not take place. While operations continued, sales declined and public interest claims, such as wages, payment obligations for goods, and taxes, have surged."
The court further clarified the grounds for the termination by stating, "To operate the company and carry out the rehabilitation plan, at least approximately 200 billion won in operating funds is required, but this amount has not been secured to date." The court made the decision to terminate the procedure ex officio, without submitting the rehabilitation plan to the creditors' meeting for review and resolution.
Previously, Homeplus received a decision to commence rehabilitation procedures in March last year. Following an investigation by Samil PricewaterhouseCoopers, the court-appointed examiner and administrator, in June of the same year, the company was acknowledged as having a higher going-concern value than its liquidation value. As a result, the court permitted the drafting of a ‘structural innovation-type rehabilitation plan.’ Accordingly, Homeplus submitted a plan focused on closing unprofitable stores, business transfers, and M&A, and even submitted a revised plan on June 30. The court granted two extensions for the approval period of the rehabilitation plan, in March and April, so that Homeplus could secure business transfers and new funds (DIP financing). However, Homeplus failed to secure the essential funds by the final deadline, which was today.
Legally, Homeplus has not yet entered a full bankruptcy process. Homeplus may file an immediate appeal within 14 days from the date of the termination decision. Since the core reason for this decision is 'lack of funds,' if 200 billion won is raised and submitted within the appeal period, the original court may restart the rehabilitation procedure through a system known as 'court-initiated reconsideration.'
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However, industry observers believe that, given Homeplus failed to resolve its funding crisis despite several months of extensions, the likelihood of securing as much as 200 billion won in just two weeks is extremely low.
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