Rehabilitation court issues ultimatum to Homeplus

(Yonhap)

The Seoul Bankruptcy Court has issued an ultimatum to South Korean discount store Homeplus Co., demanding an official position on whether its rehabilitation process should continue.

The court’s move comes as negotiations among creditors over the company’s submitted rehabilitation plan have made little progress.

According to court and retail industry sources on Thursday, the Seoul Bankruptcy Court sent an official notice to stakeholders, including Homeplus’ major shareholder MBK Partners, creditor groups, and labor unions, requesting their opinions on whether the rehabilitation process should proceed by Friday.

The court is reportedly of the view that the structural innovation-type rehabilitation plan submitted by Homeplus is effectively unfeasible.

In particular, the company has yet to secure the 300 billion won ($208.1 million) in debtor-in-possession financing it requested as the first step of its recovery plan.

Earlier, Homeplus proposed a plan under which MBK, the Korea Development Bank, and Meritz Financial Group would each contribute 100 billion won, raising a total of 300 billion won in emergency funds.

However, the proposal failed to secure sufficient support, making execution unlikely.

The court has also demanded that if Homeplus intends to continue rehabilitation, it must present a detailed financing plan along with a new candidate for third-party administrator, suggesting that recovery under the current management structure is deemed difficult.

MBK Partners stated on Thursday that it would fulfill its promised commitment of 100 billion and consider replacing the company’s administrator.

Meanwhile, the labor union in Homeplus is pushing for the court to appoint United Asset Management Corp, a quasi-public restructuring specialist, as a new third-party administrator. Under this proposal, UAMCO would acquire Homeplus and pursue a government-led sale.

Industry insiders warn that even if UAMCO were to acquire the company, immediate operating funds would still be required.

“Without securing the 300 billion won emergency funding, it would be impossible to continue operating Homeplus,” said an industry source. “Liquidation cannot be ruled out.”

The court plans to review opinions submitted by creditors and make a final decision on whether to continue the rehabilitation process before March 4, the deadline for approving Homeplus’ rehabilitation plan.