Hana Securities "Homeplus Debt Restructuring, The Hidden Key is Lease Liabilities of Rented Stores"

An analysis has emerged that the hidden key to Homeplus's debt restructuring, which has entered corporate rehabilitation proceedings (court receivership), lies in lease liabilities related to rented stores. While the current situation is unlikely to have a direct adverse impact on the credit bond market, it is diagnosed that it will continue to fatigue the financial market like small pebbles.

Yonhap News

On the 12th, Kim Sang-man, a researcher at Hana Securities, stated in the report titled "Small Pebble(s) Thrown by Homeplus," "Although a significant portion of the acquisition financing burden that Homeplus took on when acquired by the private equity fund MBK Partners appears to have been reduced through asset sales, in reality, this is not the case."

Researcher Kim explained, "This is because Homeplus continues to use the sold stores through a re-lease method, merely changing the form of debt from general borrowings to lease liabilities," adding, "To use a mortgage loan example, it is like changing from an interest-only 'grace period' mortgage loan with extended maturity to a principal and interest installment repayment mortgage loan."

Accordingly, Kim pointed out that Homeplus's debt structure is more complex than it appears on the surface. He said, "Considering lease liabilities, the composition of stakeholders involved in financial debt is more complicated," and added, "One must look at the equity and financial loans raised by real estate investment funds such as REITs during the acquisition of sold stores, the securitization/credit enhancement of those loans, and the exposure of construction companies (developers) involved in project financing (PF) for redeveloping prime location stores for other uses."

He continued, "The current situation, where the proportion of indirect financial debt has increased like this, implies that Homeplus's future debt restructuring may not proceed smoothly," expressing concern. According to Hana Securities, as of the fiscal year ending last February, Homeplus's REITs debt amounts to approximately 3.8501 trillion KRW.

Researcher Kim said, "Homeplus has limited accessibility to the capital market, so the possibility of directly affecting the credit bond market is limited," but forecasted, "As exposure related to leased real estate such as lease liabilities increasingly reveals its reality, financial market fatigue will continue for the time being." He explained that the issue raised by Homeplus is unlikely to be a decisive blow but is highly likely to continuously discomfort market participants like 'small pebbles that keep flying.' He added, "From the market's perspective, the only positive point currently is the possibility of a decline (downward adjustment) in market (benchmark) interest rates due to the increased likelihood of economic slowdown," but also noted, "It is true that there is skepticism about whether that background itself is ultimately a positive variable for credit."

Homeplus, the second-largest large-scale supermarket in Korea, filed for rehabilitation proceedings at the court on the 4th and received a commencement decision.

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