The move, citing short-term liquidity concerns, has intensified scrutiny over MBK’s management strategy, which left the retailer burdened with heavy debt.
Homeplus, which generates annual revenue exceeding 7 trillion won (US$4.8 billion), said it sought bankruptcy protection to “alleviate the burden of immediate debt repayments” after recent credit rating downgrades threatened its ability to meet supplier payments due in May.
Industry analysts point to what they call a textbook case of the “winner’s curse,” where MBK’s 7.2 trillion won acquisition was financed with about 5 trillion won in debt, leading to years of financial distress for Homeplus.
Since 2021, the retailer has suffered consecutive operating losses — 133.5 billion won in 2021, 260.2 billion won in 2022, and 199.4 billion won in 2023. It reported a net loss of 574.3 billion won last year, marking its third straight year in the red.
While traditional retailers have faced increasing competition from e-commerce, critics argue that MBK exacerbated Homeplus’s decline by failing to make necessary investments while prioritizing debt repayments. To service its acquisition debt, MBK sold approximately 20 Homeplus stores and leased them back — a strategy that added to the retailer’s financial burden rather than alleviating it.
“The problem is not just market conditions but MBK’s financial engineering,” said a retail industry analyst. “They extracted value without reinvesting in the business.”
Labor unions claim that since MBK’s takeover, Homeplus has incurred 3.1 trillion won in interest expenses from 2016 to 2023, a figure that dwarfs the company’s total operating profit of 471.3 billion won over the same period. Job cuts and dwindling investments have also eroded competitiveness, further compounding the retailer’s woes.
“If they filed for receivership without defaulting, simply to reduce or restructure their debt, then MBK has a moral problem as the controlling shareholder,” said an industry insider.
The filing comes despite Homeplus not yet having defaulted on payments. However, the company has already deferred 350 billion won in supplier payments, offering interest on late settlements.
According to Korea Investors Service, Homeplus’ net debt reached 5.31 trillion won as of late November 2024, with a debt-to-equity ratio surging to 1,408.6 percent despite capital increases from land revaluations.
The company’s outstanding financial obligations include 1.2 trillion won borrowed from Meritz Financial Group, 110 billion won in bank loans, and 250 billion won in commercial paper, amounting to around 2 trillion won in total liabilities.
The broader retail sector has been rattled by Homeplus’s court filing, which comes amid growing financial instability in the industry. In July last year, e-commerce platforms Tmon and WeMakePrice both suffered major settlement defaults, adding to concerns over the financial health of South Korea’s retail sector. Some Homeplus suppliers are now considering debt collection procedures over unpaid invoices.
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