Joint Press Conference by Kim Kwangil and Jo Juyoun on the 14th
Completion of Claims Payments to Small Business Owners, Except Some Store Owners
Denial of Allegations of Prior Planning for Rehabilitation Application
Ongoing Concerns from Labor Union and Short-term Bond Victims
The management of Homeplus, the second-largest hypermarket chain, appeared publicly for the first time since the commencement of corporate rehabilitation proceedings and promised to sequentially repay all claims, including trade receivables such as payments to partner suppliers and settlements with in-store tenants. MBK Partners, the private equity fund (PEF) operator and major shareholder of Homeplus, denied allegations that it had prior knowledge of the credit rating downgrade and had prepared for rehabilitation in advance, explaining that the rehabilitation application was made to prevent default due to short-term liquidity deterioration. However, they avoided giving a direct answer regarding responsibility issues, including Chairman Kim Byung-joo’s personal financial contributions.
Vice Chairman Kim Kwang-il (left) and Homeplus co-CEOs including President Cho Ju-yeon bow in greeting before making a statement at a press conference related to corporate rehabilitation procedures held on the 14th at the Homeplus headquarters in Gangseo-gu, Seoul. Photo by Yonhap News
"Repayment of 340 billion KRW in trade receivables... No issues with remaining payments"
On the 14th, at a press conference held at Homeplus headquarters in Gangseo-gu, Seoul, Homeplus President Jo Ju-yeon said, "We sincerely apologize to all partners, tenants, and creditors who have experienced inconvenience due to this rehabilitation process," adding, "We will responsibly repay all claims and ensure that no one suffers damage due to the corporate rehabilitation proceedings."
The press conference was attended by nine company executives, including Kim Kwang-il, co-CEO of Homeplus and vice chairman of MBK, and President Jo, who bowed their heads. This was the first official statement since the Seoul Rehabilitation Court commenced the rehabilitation proceedings for Homeplus on the 4th, ten days prior.
Representing the company, President Jo emphasized that business operations, cash inflows, and debt repayments are proceeding smoothly to alleviate market concerns about liquidity issues. Jo stated, "Thanks to the court’s swift decision to commence rehabilitation proceedings, normalization is progressing rapidly. As of the day before, we have repaid 340 billion KRW of trade receivables, and payments to most small-scale creditors, excluding large corporations and brand store owners, will soon be completed."
The total amount of trade receivables Homeplus must repay is approximately 460 billion KRW. Some tenants interviewed by our reporters confirmed that although they had not received settlement payments for January sales until last week, repayments resumed two days ago.
President Jo asserted, "As of yesterday, we hold about 160 billion KRW in cash, and cash inflows occur daily through operations. Considering this, there is no problem with paying the remaining trade receivables." He reiterated, "We are sequentially paying trade receivables owed to partners and tenant store owners. Even if it takes some time, all payments will be made."
According to Homeplus, sales during the week following the commencement of rehabilitation proceedings increased by 13.4% compared to the same period last year, which was a record high, and customer numbers grew by 5%. As of the day before, transaction retention rates for hypermarkets, supermarkets, and online channels were maintained at about 95%, with malls at 99.9%, logistics at 100%, and contractors at 100%, all at levels comparable to before the rehabilitation proceedings. President Jo evaluated, "The sales increase at the 'Homeplus Mega Food Market' food-specialized stores launched in 2022, growth in the online sector, and surpassing 11 million membership customers have significantly expanded our customer base and improved performance."
However, Homeplus requested understanding and support from stakeholders for the company’s rapid normalization through business activities. President Jo promised, "It is realistically difficult to pay all claims at once, so we prioritize small business owners and small-scale creditors and pay them sequentially. If large corporate partners show some concession, we will definitely repay all claims according to the installment schedule."
Homeplus stated that trade receivables incurred after the commencement of rehabilitation proceedings are being paid normally, including those to large corporations, and that the request for concessions from large corporations pertains to rehabilitation claims incurred before the commencement date, which will also be fully repaid later.
Vice Chairman Kim Kwang-il (left) and President Cho Joo-yeon, co-CEOs of Homeplus, are speaking at a press conference related to corporate rehabilitation procedures held on the 14th at the Homeplus headquarters in Gangseo-gu, Seoul. Photo by Yonhap News
"No prior preparation for rehabilitation... distancing from major shareholder responsibility"
During the press conference, questions arose about whether MBK, the major shareholder, had prepared for Homeplus’s rehabilitation proceedings well before being aware of the credit rating downgrade. Vice Chairman Kim responded, "Homeplus first received preliminary notice of the credit rating downgrade from the credit rating agency at 4 p.m. on the 25th of last month, and we requested a reassessment the next day. However, since the request was not accepted, the management urgently discussed during the Samiljeol holiday and decided to apply for rehabilitation proceedings."
He added, "Retail companies collapse rapidly when they go bankrupt. Our top priority was to normalize Homeplus before default due to short-term liquidity crises such as working capital procurement, and we believed corporate rehabilitation was the only option."
Regarding claims that the rehabilitation application was made due to a special clause requiring early repayment of loans borrowed from Meritz Financial Group, he said, "We have already repaid 85 billion KRW of the loan, and according to real estate sale contracts, the remaining amount can also be sufficiently repaid. Due to the nature of retail, promissory notes and short-term bonds maturing within three months raised default concerns, prompting the rehabilitation application."
Previously, Meritz Securities, Meritz Fire & Marine Insurance, and Meritz Capital lent 1.3 trillion KRW to Homeplus in refinancing loans in May last year. The interest rate was about 8% per annum, with special clauses requiring early repayment of 250 billion KRW within one year and 600 billion KRW within two years.
Vice Chairman Kim also denied allegations that MBK profited heavily from Homeplus, stating, "Homeplus has not been profitable, so MBK has not received dividends as a major shareholder. The only dividends received are about 3% annually from preferred shares invested." However, regarding the Homeplus labor union’s responsibility claims related to Chairman Kim Byung-joo’s personal financial contributions, Kim said, "This is not a matter to discuss at the Homeplus press conference. It is difficult to answer here," drawing a clear line.
On the 14th, representatives of the Homeplus Liquidity Bond Victims' Committee held a press conference demanding the classification of victims' commercial bonds in front of the Homeplus headquarters in Gangseo-gu, Seoul. Photo by Yonhap News
Union and Victims’ Distrust Remains
Although Homeplus management promised repayment of trade receivables through normal business operations, opposition from the labor union and victims who suffered from the sudden initiation of rehabilitation proceedings continues.
Individual investors who invested about 300 billion KRW in asset-backed short-term bonds (ABSTB) securitized from Homeplus’s card payment receivables formed an emergency countermeasure committee and gathered in front of the press conference venue, claiming, "The issuance of Homeplus’s short-term bonds was a 'fraudulent act' carried out with prior knowledge of the credit rating downgrade." They demand that these short-term bonds, whose payments were deferred due to rehabilitation proceedings, be recognized as trade receivables and given priority repayment instead of financial claims.
Vice Chairman Kim said, "We understand that Homeplus purchased goods with credit cards, and the credit card companies’ claims were acquired by securities companies. The company cannot judge whether this is trade receivables or financial claims, but we will explain precisely to the court how this transaction was conducted."
The Homeplus labor union claims that after MBK acquired Homeplus in 2015, it focused on generating real estate income by selling and leasing back many stores from the following year, increasing rental costs and worsening management. There are also signs of plans to close or sell some stores and lease them back as part of the rehabilitation plan.
Vice Chairman Kim explained, "Sale and leaseback is a method used by many retailers, and we secured working capital by selling some Homeplus stores and re-entering them." He added, "After applying for rehabilitation proceedings, we cannot lead the process alone; it is carried out through cooperation among creditors, debtors, and the court. The claim that MBK has already established a management plan after rehabilitation proceedings is groundless."
Homeplus plans to submit a rehabilitation plan to the court by June 3 after creditor investigations, asset and corporate value assessments, and stakeholder briefings. The union voices concerns about potential restructuring during the rehabilitation process and demands that MBK take responsibility for Homeplus’s normalization. Vice Chairman Kim denied this, saying, "The commencement of rehabilitation proceedings prioritizes repayment to stakeholders. There are no plans to proceed with restructuring or the previously planned sale of Homeplus Express (supermarket) stores, as the situation has changed due to the rehabilitation proceedings."
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