Homeplus Faces Bankruptcy as Funding Deadline Approaches

Homeplus is at a critical juncture following a court decision to terminate its rehabilitation process. The company must secure 200 billion won (approximately $150 million) in operating funds within the next 14 days to avoid effectively entering bankruptcy. The fate of over 12,000 employees and partner companies hangs in the balance as the largest shareholder, MBK Partners, and major creditor Meritz Financial Group remain at odds over funding responsibilities.
 
According to the retail industry, the Seoul Bankruptcy Court's Rehabilitation Division decided on July 3 to terminate the rehabilitation process for Homeplus. The company submitted a revised rehabilitation plan on June 30 that reflected cost-cutting measures but failed to address the court's concerns regarding the 200 billion won funding strategy. The court stated, "At least 200 billion won is needed to implement the rehabilitation plan, and this amount has not been secured to date. Therefore, we are terminating the rehabilitation process due to the lack of feasibility for the plan."
 
Homeplus and its creditors can file an immediate appeal against this decision within 14 days. However, since the last day of the appeal period, July 17, is a public holiday, the effective deadline will be July 20. The key issue is who will bear the 200 billion won burden. Meritz has indicated it could provide 100 billion won, contingent on a guarantee from MBK and its chairman, Kim Byung-joo. MBK has proposed that if Meritz loans 200 billion won, it would guarantee 100 billion won of that amount. With both sides unable to narrow their differences, securing the necessary funding appears challenging without a dramatic agreement.
 
If Homeplus fails to secure the funds, the termination decision will be finalized, and the case may proceed to bankruptcy proceedings at the court's discretion or upon creditor application. In such a scenario, the court would declare Homeplus bankrupt, leading to a liquidation process where assets would be distributed to creditors. Meritz had previously lent Homeplus 1.3 trillion won in 2024, securing 62 stores as collateral.

Once bankruptcy proceedings commence, the trustee is likely to auction off the collateralized stores to recover principal and interest. Given the sluggish performance of large discount stores, it is anticipated that competing retailers may opt to repurpose the properties for residential, logistics, or commercial use rather than directly acquiring the stores. If rehabilitation fails, the repercussions are expected to extend to the over 12,000 Homeplus employees, store owners, and partner companies that have not received payments.
 
If funding is secured within the appeal period, there remains a possibility for the court to reconsider the termination decision and resume the rehabilitation process. However, even with funding, challenges remain in restoring trust with suppliers and reversing declining sales. On July 3, the government announced emergency liquidity support measures totaling 440 billion won for partner companies, including wage arrears payments and low-interest living expense loans related to the Homeplus situation.
 
The supermarket union urged the government to take all necessary emergency measures to devise a recovery plan for Homeplus, warning that if the company moves toward liquidation, it could devastate hundreds of thousands of jobs and local economies.