Homeplus Crisis Extends Into the New Year... Another Sale Falls Through
Attention Focused on Decision by Largest Creditor Meritz
With Homeplus submitting its rehabilitation plan, the fate of the company now lies in the hands of Meritz Financial Group. As the plan reportedly includes the partial separation and sale of certain business units, and DIP financing that would subordinate existing creditors, analysts say the success or failure of the restructuring depends on the judgment of Meritz, Homeplus's largest creditor.
According to the retail and investment banking industries on December 30, Homeplus submitted a "structural innovation-type rehabilitation plan" to the Seoul Bankruptcy Court the previous day. The plan reportedly includes the separation and sale of the Homeplus Express business unit, which operates as a supermarket chain, fundraising through DIP financing, and the possibility of a merger and acquisition (M&A) after approval.
The problem is that none of these measures can be implemented without the consent of the creditors (at least three-quarters of secured rehabilitation creditors and two-thirds of unsecured rehabilitation creditors). Meritz Financial Group (including its securities, insurance, and capital arms) lent Homeplus approximately 1.2166 trillion won in May of last year. As of the end of last year, Meritz was the largest creditor, accounting for about 60% of Homeplus's short- and long-term borrowings. While Meritz has recovered 256.1 billion won, including principal and interest, as of May this year, about 1 trillion won remains outstanding. This effectively gives Meritz the "casting vote," enabling it to block or approve virtually any measure.
The calculation for Meritz has become even more complicated. As the top-priority creditor, Meritz could immediately exercise its collateral rights, but this would require closing and selling off multiple stores. With the Homeplus situation having become a political issue, criticism that was previously directed at MBK Partners could now be aimed at Meritz. Even if Meritz accepts this risk, there are still problems. An investment banking industry insider explained, "As some of the most profitable business units are separated, Homeplus's corporate value may decline, making a future sale even more difficult."
It is also difficult to opt for a "broad concession" such as lowering interest rates or restructuring the debt, as Meritz is a listed financial company and must consider its fiduciary duty to shareholders as well as the risk of breach of trust. Setting such a precedent could also lead to similar demands in future restructuring cases.
It is uncertain whether Meritz will readily agree to DIP financing. DIP financing is a financial technique that grants repayment priority to new capital providers supporting a company under rehabilitation proceedings. For Homeplus, whose liquidity has dried up to the point of being unable to pay taxes, utility bills, or even employee salaries, this could be a lifeline. However, for Meritz, being pushed down the repayment order is a significant downside. From Meritz's perspective, the best option would be liquidation, which would allow it to recover its remaining claims in full, but being blamed for the bankruptcy of Homeplus would be a heavy burden.
Ultimately, analysts believe it will not be easy for Meritz to maintain a hardline stance. Given the symbolic importance of Homeplus and the broad impact of a failed rehabilitation, the creditor group cannot avoid social responsibility. An industry insider said, "The most realistic scenario would be for Meritz to initially oppose the plan in principle, then move toward conditional detailed negotiations," adding, "In the end, it will depend on how much Meritz is willing to concede and what guarantees it can secure in return."
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