Homeplus signed contracts to sell two closed stores for 170 billion won and is finalizing an additional sale of its Yuseong branch in Daejeon for 60 billion won, securing a total of 230 billion won in liquidity amid bankruptcy proceedings. The sales, reportedly to a public institution, prompted political proposals to convert part of the proceeds into debtor-in-possession (DIP) financing, but Meritz Financial, the largest creditor holding first-priority collateral on the stores, rejected the request and demanded full debt repayment. Meritz lent approximately 1.3 trillion won to Homeplus in May 2024 with first-priority collateral on 62 stores and previously recovered around 250 billion won from three store sales during the early rehabilitation process.
Homeplus Secures 230 Billion Won Through Store Sales
Homeplus recently signed contracts to sell two of 37 non-core stores scheduled for closure, generating 170 billion won in proceeds. The company is finalizing an additional contract for the Daejeon Yuseong branch valued at 60 billion won, bringing total expected proceeds to 230 billion won. A public institution under the government reportedly acquired the stores. The sales are part of Homeplus's asset liquidation efforts as it navigates bankruptcy proceedings.
Meritz Financial Rejects DIP Financing Proposal
The National Assembly and Homeplus proposed using a portion of the 170 billion won in sale proceeds as DIP financing to sustain operations, but Meritz Financial refused and insisted on applying the full amount to debt repayment. Democratic Party lawmaker Kim Nam-geun stated that Meritz maintained its position of "taking it all" and conditioned any rehabilitation agreement on full recovery of proceeds from future asset sales. DIP financing under the Debtor Rehabilitation Act grants priority repayment status as a public interest claim, ensuring creditors recover principal even if Homeplus enters liquidation. However, Meritz holds first-priority collateral rights on the sold stores, making its consent necessary for proceeds to flow directly to Homeplus.
Legal Constraints on Converting Sale Proceeds to DIP Funds
Legal experts noted that converting sale proceeds into DIP financing is structurally complex because the proceeds are tied to existing collateral rights rather than new financing. Converting secured asset sale proceeds into debtor rehabilitation funds could raise breach-of-trust concerns. Additionally, consent from junior creditors would be required to restructure the priority order, but junior creditors have limited incentive to agree to such adjustments, reducing the feasibility of the proposal.
Court Sets July 20 Deadline for 200 Billion Won Funding
The Seoul Rehabilitation Court's Rehabilitation Division 4 (Chief Judge Jeong Jun-young) decided to terminate Homeplus's corporate rehabilitation procedure and stated that the company could resume proceedings by raising funds and filing an immediate appeal within 14 days. The original 14-day deadline from the decision date fell on Constitution Day (a public holiday), extending the deadline to July 20. If Homeplus fails to secure 200 billion won by that date, the company will proceed to liquidation.
FAQ
What stores did Homeplus sell to raise 230 billion won?
Homeplus signed contracts to sell two closed stores for 170 billion won and is finalizing the sale of its Daejeon Yuseong branch for 60 billion won, totaling 230 billion won. A public institution under the government reportedly acquired the stores.
Why did Meritz Financial reject the DIP financing proposal?
Meritz Financial holds first-priority collateral rights on the sold stores and demanded that the full 230 billion won in sale proceeds be applied to debt repayment. The company refused to allow any portion of the funds to be converted into DIP financing for operational support.
What is the court deadline for Homeplus to avoid liquidation?
The Seoul Rehabilitation Court set a deadline of July 20 for Homeplus to raise 200 billion won and file an immediate appeal to resume rehabilitation proceedings. If the company fails to meet this deadline, it will enter liquidation.
