Homeplus closed all 67 operating large-format stores effective the 13th after failing to secure emergency operating funds. Seoul Rehabilitation Court set a deadline of the 20th for the retailer to present a plan to secure ₩200 billion in emergency funding, a condition for extending rehabilitation proceedings. The company's largest creditor, Meritz Financial Group, declined repeated loan requests. The choice between linked bankruptcy and general bankruptcy procedures will determine the priority status of approximately ₩1 trillion in administrative claims accumulated during rehabilitation proceedings.
Court Sets Funding Deadline as Homeplus Halts Operations
Seoul Rehabilitation Court decided on the 3rd to terminate Homeplus rehabilitation proceedings but stated it could reconsider extending the proceedings if the company submits a plan to secure ₩200 billion in emergency operating funds by the 20th. Homeplus requested operating fund loans from Meritz Financial Group multiple times, but the requests were not accepted. The immediate appeal period concludes on the 20th. Operating funds are depleted. Homeplus stated it entered temporary closure of headquarters and all large-format stores starting the 13th due to inability to operate stores normally and to maintain security and safety until circumstances change. The company attempted to secure funds by selling core store properties, but no buyers have appeared.
Linked Bankruptcy vs. General Bankruptcy Affects ₩1 Trillion in Claims
Linked bankruptcy (견련파산) is a bankruptcy procedure conducted in connection with rehabilitation proceedings to prevent companies whose rehabilitation proceedings have been suspended from being neglected. If linked bankruptcy proceeds, the priority repayment status of administrative claims accumulated during rehabilitation proceedings is maintained. The scale of administrative claims known to date exceeds ₩1 trillion. If general bankruptcy proceeds after rehabilitation proceedings are confirmed terminated, the legal status and repayment method of administrative claims may change. Administrative claims are claims against debtors recognized to cover costs necessary for carrying out rehabilitation proceedings and are repaid before general rehabilitation claims or secured rehabilitation claims. They include product payments, unpaid wages, and DIP financing. However, linked bankruptcy requires the court to directly declare bankruptcy, so political and social burden is not small. Homeplus labor union immediately strongly criticized the government and MBK Partners in response to the temporary closure decision and declared an all-out struggle. According to the union, the number of Homeplus workers, tenant operators, suppliers, and partner company workers reaches 100,000. Tenant store owners at Homeplus locations nationwide will also gather in front of the presidential office on the 15th to demand guarantees for livelihood and protection of business rights. Choi Hyo-jong, attorney at Law Firm Lin, stated that it appears more likely that creditors will apply for bankruptcy rather than the court directly declaring bankruptcy (linked bankruptcy), and if individual enforcement procedures proceed without a bankruptcy declaration, hundreds or thousands of lawsuits could occur across the country with high socioeconomic costs.
Asset Liquidation Timeline and Creditor Recovery
According to Homeplus audit reports, the company's cash and cash equivalents as of the end of February this year amount to approximately ₩10.4 billion. Major assets are mostly real estate on which Meritz Financial and other creditors have established security rights, so future asset disposal is expected to be key to debt repayment. If the court accepts a bankruptcy application in the future, appointment of a bankruptcy trustee, asset disposal, and debt repayment procedures are expected to proceed sequentially. Meritz Financial and others who secured security rights on major assets are expected to proceed with asset disposal procedures. According to Meritz Financial Group, the number of Homeplus stores currently held as collateral is 61. Meritz recovered ₩51.5 billion from the sale of Sinnae store and received total repayment of ₩256.1 billion including interest and part of principal. The remaining recovery target is approximately ₩1 trillion. The industry views that real estate sales could take at least 1-2 years or more. One investment bank industry official stated that many stores have good locations so construction companies are already showing interest in some real estate assets, but actual sales will likely take at least 1-2 years. After repayment to Meritz is completed with real estate sale funds, remaining creditors are expected to receive repayment with remaining funds. If linked bankruptcy proceeds and priority of administrative claims is secured, the repayment level for subordinated creditors such as convertible bonds is expected to be limited. If general bankruptcy proceeds and priority of administrative claims is lowered, resources available to other creditors may increase somewhat. Meanwhile, Homeplus stated that while large-format store operations stop, internal shopping malls can continue operating if tenant companies wish. Major tenant stores such as Olive Young and Daiso also plan to continue operations until the court's final result on the 20th.
FAQ
What did Seoul Rehabilitation Court decide regarding Homeplus on the 3rd?
Seoul Rehabilitation Court decided on the 3rd to terminate Homeplus rehabilitation proceedings but stated it could reconsider extending the proceedings if the company submits a plan to secure ₩200 billion in emergency operating funds by the 20th.
Why did Homeplus close all 67 stores on the 13th?
Homeplus closed all 67 operating large-format stores on the 13th due to depleted operating funds and inability to maintain facilities and operations normally. The company's largest creditor, Meritz Financial Group, declined repeated loan requests for operating funds.
How does linked bankruptcy differ from general bankruptcy for Homeplus creditors?
Linked bankruptcy maintains the priority repayment status of approximately ₩1 trillion in administrative claims accumulated during rehabilitation proceedings. If general bankruptcy proceeds instead, the legal status and repayment method of administrative claims may change, potentially affecting the order and amount of creditor repayments.
