Homeplus, which had been pushed to the very edge of bankruptcy, is reviving its chances of survival. That is because Meritz Financial Group, its largest creditor, has tentatively agreed on July 15 to lend ₩200 billion in debtor-in-possession (DIP) financing, with major shareholder MBK Partners and Chairman Michael Byungju Kim guaranteeing the full amount. If this support plan clears the boards of three Meritz affiliates today (the 16th), Homeplus gains the footing to file an immediate appeal against the court’s decision to terminate its rehabilitation. That said, as of this writing the boards have not reached a conclusion, and even if they approve, many hurdles remain. 🛒

TL;DR

  • The Seoul Bankruptcy Court ruled on the 3rd to terminate Homeplus’s rehabilitation, effectively setting it on a path toward bankruptcy.
  • On July 15, a tentative deal for a ₩200 billion Meritz DIP loan, fully guaranteed by MBK and Chairman Kim, reignited hopes of survival.
  • Three Meritz units — fire & marine insurance, securities, and capital — are reviewing the loan at their boards today (the 16th), with a final conclusion expected late in the day (unconfirmed at publication).
  • If approved, Homeplus will appeal by the immediate-appeal deadline of the 20th, and if the court accepts it, the rehabilitation is extended to September 4.
  • Yet public-interest claims total about ₩940 billion (nearing ₩1 trillion), and with roughly 12,000 employees plus suppliers, up to 100,000 people could be affected — so full normalization remains a long way off.

📉 What Happened — Rehabilitation Terminated, Then an Indefinite Shutdown

The first thing to note is that Homeplus has already been driven legally to the “brink of bankruptcy.” On July 3, the Seoul Bankruptcy Court judged that the revised rehabilitation plan Homeplus submitted had no realistic prospect of being carried out, and terminated the rehabilitation. The decisive reasons were that it had failed to find a new buyer and had produced no plan for raising the roughly ₩200 billion in operating funds needed to continue the process.

As the money ran dry, store operations themselves came to a halt. From July 13, Homeplus temporarily suspended operations at its headquarters and hypermarket stores nationwide. The company explained that “operating funds are completely depleted, and we cannot cover even the basic operating costs to keep stores running, let alone pay for goods,” and some stores already saw supply disruptions, centered on fresh food. About one year and four months after entering rehabilitation last March, it has effectively been driven to a point where liquidation is being openly discussed.

💰 The Twist — Meritz’s ₩200 Billion, Fully Guaranteed by MBK and Kim

The turning point was a last-minute funding deal struck with bankruptcy looming. On July 15, largest creditor Meritz Financial Group and major shareholder MBK Partners tentatively agreed to supply Homeplus with ₩200 billion in emergency operating funds (DIP). Under the structure, Meritz lends the money while MBK Partners and Chairman Michael Byungju Kim guarantee the full ₩200 billion in their personal capacity. DIP refers to fresh financing injected into a company undergoing rehabilitation; because it carries priority-repayment status, creditors find it relatively easier to agree to.

With this deal, the financial burden Chairman Kim and MBK are shouldering for Homeplus’s rehabilitation has grown heavier. Adding their earlier personal contributions and funding support, the market reckons the total support they are taking on swells to around ₩600 billion. Given the persistent “accountability” criticism that MBK used borrowed money to acquire Homeplus and then sold off stores, worsening its management, the major shareholder stepping in to guarantee the loan directly is read by some as an extension of that.

For reference, Homeplus back in May handed over “Homeplus Express,” its super-supermarket (SSM) division long regarded as a prime asset, to NS Home Shopping, an affiliate of the Harim Group. However, that deal was a “debt-assumption” arrangement in which the acquirer took on roughly ₩180 billion of Express’s debt, so the cash Homeplus actually received came to about ₩120.6 billion. Even that was mostly spent on overdue wages and the like, so its effect in easing the cash crunch was limited.

🏛️ Today’s Board Vote Is the Tipping Point — the Immediate Appeal and September 4

The market’s eyes are now fixed on the boards of the three Meritz Financial units convening today (the 16th). Meritz Fire & Marine Insurance, Meritz Securities, and Meritz Capital will each hold board meetings to review and vote on the ₩200 billion DIP support. Securities and Capital are said to be meeting in the morning and Fire & Marine in the afternoon, with a final conclusion expected late in the day. Since the result is unconfirmed as of this writing, it is worth keeping in mind that if even one of the three withholds approval, the funding structure may have to be reworked.

If the plan passes, Homeplus plans to appeal the Seoul Bankruptcy Court’s rehabilitation-termination ruling by the immediate-appeal deadline of the 20th. Earlier, even as it terminated the rehabilitation, the court left room to reconsider its decision if Homeplus secured the ₩200 billion in emergency operating funds and appealed before the 20th. If the court accepts the appeal, the rehabilitation is extended to September 4, during which Homeplus must draw up a revised rehabilitation plan and win creditor approval. In short, this money is less an “investment” to normalize the company than a “safety net” to stave off immediate bankruptcy and buy time.

⚠️ Even If Approved, “One Mountain After Another” — ₩940 Billion in Public-Interest Claims and Related Bankruptcy

Even if the funds come in, the tasks facing Homeplus are by no means light. The heaviest burden is public-interest claims. Homeplus’s public-interest claims currently stand at about ₩940 billion, nearing ₩1 trillion. Of that, commercial-transaction claims such as unpaid supplier payments make up the largest share at about ₩794 billion, and wages, taxes, and severance pay are also subject to priority repayment. That is why there are concerns the ₩200 billion could be depleted quickly.

The reach of the fallout is also broad. Homeplus has roughly 12,000 employees, and adding indirect employment, suppliers, and local commercial districts, concerns have been raised even in political circles that up to 100,000 people could be affected in a liquidation. If rehabilitation ultimately falls through, a “related bankruptcy” process comes into view. Related bankruptcy is a procedure in which the court declares bankruptcy when rehabilitation is impossible for lack of a buyer, fresh funds, or a viable plan. Unlike ordinary bankruptcy, it preserves the priority of the public-interest claims that arose during rehabilitation, thereby reducing procedural chaos. In that case, how to dispose of the roughly 67 directly operated stores regarded as “prime outlets” becomes the next point of contention.

On top of this remains the fundamental homework of restoring the trust of suppliers and consumers. Unless suppliers’ trust returns, normalizing product supply is difficult, and it will take time to rebuild the brand competitiveness weakened by prolonged management instability and draw customers back into stores. As one industry official put it, “The ₩200 billion is the minimum safety net to prevent bankruptcy; even after clearing the board and court procedures, restoring supplier and consumer trust and stably reopening for business will be the real starting point of rehabilitation.”

📝 The Bottom Line

To sum up, Homeplus was driven to the edge of bankruptcy by the termination of its rehabilitation, then seized a last chance at reversal through Meritz’s ₩200 billion DIP loan and the full joint guarantee from MBK and Chairman Kim. Whether the three Meritz boards approve today (the 16th) is the first tipping point, and clearing it opens the next gates: the immediate appeal by the 20th and the extension of rehabilitation to September 4.

Still, it should be viewed soberly that this money does not amount to “normalization.” Public-interest claims nearing ₩1 trillion, employment of some 12,000, and the task of restoring supplier and consumer trust all remain intact. The points to watch over the coming days are clear. First, the final board votes at the three Meritz units today. Second, whether Homeplus files its immediate appeal and whether the court accepts it. Third, if rehabilitation collapses, which way related bankruptcy and store disposal will go. As this is an ongoing situation, we recommend judging the unconfirmed parts while watching for the announcements.

※ This article is for informational purposes only and is not investment advice.

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