Homeplus Faces Liquidity Crisis, Temporarily Suspends Operations at 37 Stores... Launches Second Round of Structural Reforms

Temporary Closure of Low-Performing Hypermarkets
Resources and Product Supply Concentrated at 67 Core Stores
Leave Allowance Provided for Employees; Transfers Offered for Those Wishing to Continue Working
Additional Funding Needed Despite Express

Homeplus announced on May 8 that, following the sale of its supermarket division, Homeplus Express (Express), it is embarking on a second round of structural reforms aimed at improving the business viability of its remaining divisions, including hypermarkets, online operations, and headquarters.

A notice announcing the suspension of business is posted at the Homeplus Gyesan branch in Gyeyang-gu, Incheon. Photo by Yonhap News Agency

Starting from May 10 and continuing until July 3, Homeplus will temporarily suspend operations at 37 out of its 104 hypermarket branches with low sales contributions for approximately two months. This measure is intended to prioritize the supply of limited inventory to core stores, as major suppliers have tightened delivery conditions since the company entered corporate rehabilitation proceedings, resulting in supply disruptions.

According to Homeplus, a significant number of stores are experiencing customer attrition due to product shortages, and sales have dropped by more than 50% compared to the same period last year. Homeplus plans to concentrate available products in 67 stores to prevent further sales decline and customer loss at key locations. In addition, employees at branches where operations are temporarily suspended will receive a leave allowance equivalent to 70% of their average wage. Those who wish to continue working will be reassigned to other stores that remain open. The company clarified that the suspension applies only to the hypermarket division, and tenant businesses within the affected branches may continue operating.

Homeplus also stated its intention to prepare a significantly strengthened revised rehabilitation plan, reflecting the demands of its creditors. This plan will include measures for store operation efficiency, plans for suspending operations at certain locations, and strategies for mergers and acquisitions (M&A) of remaining business divisions. The company plans to submit the revised rehabilitation plan to the court soon and to pursue M&A of the remaining business divisions concurrently even before the rehabilitation plan is approved, following the sale of Express.

The previous day, Homeplus signed a business transfer agreement with NS Shopping, a home shopping operator under the Harim Group, which was selected as the preferred bidder for the sale of Express. It is reported that Homeplus will receive KRW 120.6 billion in cash, with NS Shopping taking over part of Express's debts. However, as it will take about two months for the sale proceeds to be received, additional liquidity is required to maintain operations and implement the rehabilitation plan during this period.

Previously, Homeplus requested bridge loans for short-term funding needed over the next two months and debtor-in-possession (DIP) loans to maintain operations until the completion of rehabilitation from its largest creditor, Meritz Financial Group (hereafter Meritz). However, it is reported that Homeplus has not yet received a specific response from Meritz regarding whether such support will be provided.

Homeplus stated, "Since the commencement of rehabilitation proceedings, all funds secured with great difficulty through asset sales, including real estate, have gone toward repaying Meritz loans, making it nearly impossible to secure even minimal operating capital. Without funding support from Meritz—which currently holds collateral over virtually all realizable Homeplus assets—it is in effect impossible for us to recover."

The company added, "Looking at other corporate rehabilitation cases, maintaining operations through funding support and pursuing business transfers or M&A results in a significantly higher creditor recovery rate than liquidation. We hope that Meritz, as the largest creditor, will take a forward-looking decision as an inclusive financial institution, considering its social responsibility and the value of mutual cooperation."

Through this second round of structural reforms, Homeplus aims to improve the business viability of its remaining divisions—including hypermarkets, online operations, and headquarters—then sell them to third parties, use the proceeds to settle unpaid debts, and complete the rehabilitation process.

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