Homeplus Enters Corporate Rehabilitation Proceedings
CJ Group Restaurants, Hotels, and Duty-Free Shops
Suspend Gift Certificate Payments... HDC Affiliates and Hotel Shilla Considering Suspension
Homeplus, the second-largest operator of large-scale supermarkets, has entered corporate rehabilitation proceedings and is now facing credit risk. Following the initiation of the rehabilitation process, Homeplus's credit rating was downgraded to the default rating of 'D,' and with retail outlets such as movie theaters and duty-free shops ceasing to accept Homeplus gift certificates, the liquidity crisis appears to be worsening.
According to the distribution industry on the 5th, Outback Steakhouse stopped accepting Homeplus gift certificates starting that day. Previously, CGV, a movie theater under CJ Group, and stores operated by CJ Foodville (Tous Les Jours, VIPS, The Place), Seoul Pullman Hotel, and Shilla Duty-Free Shop also stopped accepting gift certificates from the previous day.
Currently, there are more than 20 places where Homeplus gift certificates can be used, including duty-free shops and hotels affiliated with Hotel Shilla, Everland, dealership stores of Cheil Industries, and HDC subsidiaries such as HDC I'Park Mall, Oak Valley, and HDC Shilla Duty-Free Shop, as well as Outback Steakhouse. It is known that HDC subsidiaries like HDC I'Park Mall, Oak Valley, and HDC Shilla Duty-Free Shop have decided to suspend gift certificate acceptance. Hotel Shilla, Shilla Stay, and Everland are in discussions regarding the suspension of gift certificate use.
Homeplus entered rehabilitation proceedings following a court decision the previous day. This was a preemptive measure to avoid a liquidity crisis caused by the downgrade in credit rating. Accordingly, repayment of financial bonds has been deferred, but general trade debts will be fully repaid. However, concerns about debt repayment have increased due to this rehabilitation process, leading partner companies to preemptively stop accepting gift certificates. Homeplus's short-term credit rating was downgraded from 'A3' to 'A3-' on the 28th of last month, and then further dropped to 'D' the day before the rehabilitation commencement was decided. The downgrade was due to poor business performance, excessive financial burden, and uncertainty about medium- to long-term business competitiveness.
Homeplus must submit a rehabilitation plan by June 3rd. The plan is expected to include improvement measures such as turning a profit and debt repayment strategies. Currently, Homeplus maintains that there is no significant problem with the debt repayment method. Considering that financial bonds amount to about 2 trillion won, real estate assets reach 4.7 trillion won, and that due to the nature of the distribution industry, about 100 billion won in cash flows in over one or two months, it is believed that negotiations with creditors can be reached without much difficulty.
However, there are no signs of a performance rebound. In fact, Homeplus will close its Sangdong branch in Bucheon, Gyeonggi Province, starting in July. The Sangdong branch is known as a 'prime store' with the highest sales nationwide. Since MBK Partners, the major shareholder of Homeplus, acquired the company in 2015, it has successively closed high-performing stores. Following the closure of top-selling stores such as Ansan branch (2021) and Gaya branch (2021), the closure of the Sangdong branch is expected to further shrink Homeplus's performance. Homeplus, which closes its fiscal year in February, saw its sales fall from 7.3002 trillion won in 2019 to 6.9314 trillion won in 2023. Next year, the Dongdaemun branch is scheduled to close, and about seven other stores are under consideration for closure.
A representative of the Homeplus labor union said, "The top 5 stores have a very significant impact on sales, so with the closure of the Ansan branch (2021) followed by the Sangdong branch, concerns are high," adding, "Assets have already been reduced as much as possible, and if operations cannot continue, it is questionable how Homeplus can survive."
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