SEOUL, July 21 (AJP) -Homeplus, South Korea's bankrupt supermarket chain, gained a three-month reprieve in what could be its final chance to stay afloat after a Seoul bankruptcy court on Tuesday overturned its earlier decision to terminate the retailer's rehabilitation process.
The Seoul Bankruptcy Court canceled its July 3 order ending Homeplus' court-led rehabilitation and extended the deadline for creditors to approve a restructuring plan until Sept. 4.
The decision came after Homeplus secured a 200 billion won ($134 million) debtor-in-possession (DIP) financing package led by Meritz Financial Group, allowing the retailer to meet the minimum liquidity requirement the court had previously said was necessary to keep the rehabilitation process alive.
Earlier this month, the court terminated Homeplus' rehabilitation after ruling that the company had failed to secure the minimum 200 billion won in operating funds required to continue the proceedings.
Homeplus immediately appealed after arranging the emergency financing, which was approved by Meritz Financial Group shortly before the July 20 deadline.
The rescue package was made possible after MBK Partners Chairman Kim Byung-ju agreed to personally guarantee the entire loan extended by Meritz's insurance, securities and capital units, removing a key obstacle to the financing.
The extension gives Homeplus until Sept. 4 to win creditor approval for a rehabilitation plan that will determine whether South Korea's once second-largest hypermarket operator can survive or ultimately be liquidated.
Earlier this month, Homeplus shut all 67 of its remaining hypermarkets after running out of cash to pay suppliers, electricity bills and other operating expenses, leaving about 12,000 employees, hundreds of suppliers and thousands of shopping mall tenants facing an uncertain future.
The nationwide shutdown marked the collapse of a retailer that once challenged E-mart for leadership of South Korea's discount store market and underscored the mounting pressures facing traditional brick-and-mortar retailers from e-commerce competition, heavy debt burdens and slowing consumer spending.
Although independent tenants inside Homeplus shopping malls have been allowed to continue operating, normal retail operations remain suspended while the company pursues its restructuring.
The latest court ruling also eases immediate pressure on lawmakers, who had planned to summon executives from MBK Partners and Meritz Financial Group to a parliamentary hearing later this month over the retailer's collapse. Whether the hearing proceeds is now expected to depend on the progress of the rehabilitation process.
Homeplus' fate will now hinge on whether it can secure creditor backing for its restructuring plan before the Sept. 4 deadline. Failure to do so would again raise the prospect of liquidation, ending one of South Korea's largest retail chains after more than two decades.
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