'Concerns Over Funding Shortage' Homeplus "Agreed on 800 Billion KRW Debt Refinancing... Completion by First Half"

Short-term Borrowings of 300 Billion KRW and Acquisition Financing of 500 Billion KRW
Homeplus "Performance Improvement Trend... Refinancing Progressing Smoothly"

Homeplus is facing concerns over a liquidity crunch as it proceeds with refinancing 800 billion KRW in borrowings maturing this year. In response, Homeplus stated on the 27th, "We have agreed to refinance short-term borrowings of 300 billion KRW and acquisition financing of 500 billion KRW, and plan to complete the refinancing process within the first half of the year."

Homeplus Gangseo Headquarters.
[Photo by Homeplus]

Previously, Homeplus borrowed 300 billion KRW from Meritz Securities in 2022 amid difficulties in raising funds following the so-called 'Legoland incident.' The maturity of this borrowing has been extended until June. Additionally, borrowings including approximately 500 billion KRW in acquisition financing and operating funds are set to mature in October this year.

Within the industry, as negotiations for refinancing the 300 billion KRW loan have prolonged, concerns have grown over the approximately 500 billion KRW in borrowings, including first and second priority acquisition financing, maturing at the end of October.

MBK formed its Blind Fund No. 3 in 2013 and acquired Homeplus from the UK’s major supermarket company Tesco in September 2015 for 7.2 trillion KRW, covering 4.3 trillion KRW through acquisition financing. MBK has repaid the acquisition financing using funds raised by closing or selling about 20 Homeplus stores, including the Ansan branch in Gyeonggi Province, and then re-leasing them through a sale and leaseback (S&LB) method, leaving about 500 billion KRW outstanding.

Homeplus is facing concerns over liquidity due to the rapid growth of e-commerce companies and sluggish performance in the large supermarket sector. In fact, Homeplus, which closes its fiscal year in February, recorded operating losses of 133.5 billion KRW and 260.2 billion KRW in the 2021 and 2022 fiscal years, respectively.

Korea Ratings downgraded Homeplus’s corporate bond and short-term commercial paper credit ratings from A3+ to A3 at the end of February last year, citing weakened competitiveness and difficulty in improving performance. At that time, Korea Ratings pointed out, "Competitiveness in the large supermarket industry has weakened. Although the absolute borrowing amount has decreased through asset sales to repay acquisition financing, financial stability has not improved. The real estate market downturn has also worsened conditions for asset sales."

Homeplus expressed confidence in its refinancing efforts, noting that sales at 24 stores renewed as 'Mega Food Market' focusing on fresh food increased by an average of 24.5%, and online sales have grown by about 20% annually over the past five years.

A Homeplus representative explained, "The refinancing of borrowings will be completed within the first half of the year. With existing stores showing positive sales growth for eight consecutive months and performance improving, some borrowings are scheduled for repayment. We have also secured refinancing commitments from domestic financial institutions, so the refinancing is progressing smoothly."

Homeplus reiterated its confidence in refinancing, highlighting that sales at 24 stores renewed as 'Mega Food Market' focusing on fresh food increased by an average of 24.5%, and online sales have grown by about 20% annually over the past five years.

In the distribution industry and capital markets, Homeplus’s appointment of MBK Vice Chairman Kim Kwang-il as co-CEO last month is interpreted as a strategic move for an exit such as a sale. However, some analysts believe that the rapid growth of online shopping and declining popularity of large supermarkets will make a sale difficult.

Homeplus is scheduled for a credit rating review this week.

This content was produced with the assistance of AI translation services.