Chairman Byungju Kim Accepted Personal Guarantee, But Rehabilitation Fails

MBK Submits Byungju Kim’s Willingness for Joint Surety to Court
Personal Guarantee Offered on Condition of 200 Billion Won Loan
Meritz Firm on Limit of 100 Billion Won Support
Rehabilitation Can Be Restarted Within Two Weeks, but Chances Ar

Yonhap News Agency

Byungju Kim, Chairman of MBK Partners, was found to have agreed to provide a personal joint guarantee to secure emergency debtor-in-possession (DIP) financing for Homeplus. However, it was revealed that the court ultimately decided to terminate the rehabilitation process as MBK and Meritz Financial Group failed to bridge their differences over financial support.

Chairman Byungju Kim Informs Court of Willingness to Provide a 100 Billion Won Personal Joint Guarantee

According to the investment banking (IB) industry and legal circles on July 3, the Seoul Bankruptcy Court sought opinions on the termination of Homeplus’s corporate rehabilitation proceedings from the debtor Homeplus, the creditors’ council, shareholders, the labor union, and others, starting June 23, just ten days before the expiration of the rehabilitation plan approval period.

At this time, MBK stated in its revised rehabilitation plan submitted on June 30 that at least 200 billion won in additional DIP financing was needed to normalize operations at 67 core stores, and that discussions were underway with Meritz Financial. MBK Partners, as well as Chairman Byungju Kim personally, officially submitted to the court that, on the condition that Meritz Financial provides a loan of 200 billion won, Chairman Kim would be willing to provide a joint guarantee for 100 billion won. It is highly unusual in the private equity fund (PEF) industry for general partner (GP) executives and founders to personally provide guarantees for the rehabilitation of a portfolio company.

Meritz Financial told the court, "Additional funding has not been secured, a business transferee has not been confirmed, and there is no verification that the rehabilitation plan can be carried out solely through restructuring without a business transfer," adding, "A responsible decision by the largest shareholder (MBK) to provide credit and capital support must come first."

In the end, Meritz Financial maintained its position of only being willing to provide support for 100 billion won, while MBK continued to urge Meritz for concessions, saying it had no further capacity to raise additional funds. Consequently, the court issued a decision to terminate the rehabilitation process on the morning of July 3. The court explained, "As of the expiration date of the rehabilitation plan approval period, no concrete or realistic evidence of additional funding plans has been submitted," clarifying the reason for the termination.

Two-Week Golden Time... Possibility for Reversal Remains

One last option remains to restart the rehabilitation process: Homeplus, as the debtor, may file an immediate appeal within 14 days under the Debtor Rehabilitation and Bankruptcy Act. The court stated, "If Homeplus secures funding and files an immediate appeal within the 14-day period, there may be justifiable grounds," and, "Depending on the reapplication plan, the court may cancel the termination and designate a date for a meeting of interested parties to examine and vote on the rehabilitation plan."

However, as the gap between MBK and Meritz remains wide, it is expected that this option will be difficult to realize. Following the decision to terminate the rehabilitation proceedings, MBK released a statement: "Despite numerous pleas from stakeholders over the past few weeks, Meritz Financial, the largest creditor, has refused to provide funding, insisting that the 100 billion won joint guarantee offered by MBK and Chairman Byungju Kim is insufficient. We earnestly request that Meritz Financial provide an operating loan of 200 billion won, and at the same time, we will actively cooperate with upcoming legal procedures to minimize harm to creditors, employees, and other stakeholders."

Meritz Financial also released a statement around the same time, saying, "We have fulfilled our role as a creditor to the fullest extent allowed by law, including deferring the exercise of security rights, cooperating with the early repayment of trade credit, and depositing a conditional 100 billion won DIP financing in escrow. Chairman Kim did not provide a guarantee for the 100 billion won DIP financing offered by Meritz, and we hope he will refrain from unreasonable demands for creditors to break the law," continuing the dispute over responsibility.

If the differences are not resolved, Homeplus is expected to initiate a separate bankruptcy filing within this month. If Homeplus files for bankruptcy, the court will appoint a bankruptcy trustee, who will distribute the company's assets to the creditors. Since Meritz Financial holds trust collateral on 62 Homeplus stores, it is expected that it will proceed with the exercise of security rights, such as the sale of these stores.

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