Private equity firm MBK Partners, the majority shareholder of Homeplus, said on March 16 that its chairman Michael ByungJu Kim will contribute personal funds to help suppliers of the discount retailer receive overdue payments amid its court-led rehabilitation.
“We take social responsibility for Homeplus‘ restructuring,” MBK Partners said in a statement. “As part of this, Chairman Kim will provide financial support to expedite payments to small suppliers facing difficulties.”
However, Kim did not disclose the exact amount, saying that it would be decided after reviewing how much is owed. Homeplus also clarified that it would first pay small vendors before larger companies and franchise owners. “We will ensure all outstanding payments to suppliers and leaseholders are covered, though some may take time,” the retailer said.
Industry experts believe Kim’s financial support will help, as Homeplus is short on cash. However, suppliers remain cautious, saying they need to see if payments actually happen.
Financial experts also raised concerns since Kim’s announcement did not address losses for investors who purchased Homeplus bonds.
Most of the short-term bonds were sold to individuals and small to mid-sized businesses rather than large investors. Data from lawmaker Kang Min-kuk of the National Assembly’s National Policy Committee shows that Homeplus had 594.9 billion won ($410 million) in outstanding short-term bonds as of March 3, including corporate notes (CP) and asset-backed securities (ABSTB). Of this, 676 cases worth 207.5 billion won ($143 million) were sold to individual investors, while 192 cases worth 332.7 billion won ($230 million) were sold to corporations, mostly small and mid-sized firms in tech, electronics, and shipping.
Some investors are accusing Homeplus of misconduct in bond sales. After it was revealed that Homeplus issued 200 billion won worth of short-term bonds in the month before its restructuring announcement, individual investors claimed they were not properly warned about the risks. They argue that the company issued the bonds despite knowing about the potential for restructuring. These investors believe that Homeplus (the issuer) and the securities firms (the sellers) committed fraud under criminal law.
Experts estimate that Homeplus needs 1.7 trillion won to recover. In the short term, it must repay 1.3 trillion won in debt, while 430 billion won is needed for restructuring and future growth. “With Homeplus’ credit rating downgraded from A3 to D, refinancing its debt is difficult. This makes personal funding from Chairman Kim or a rights offering necessary,” said a financial expert.
Concerns are mounting over potential losses from real estate investment trusts (REITs) and property funds tied to Homeplus stores, worth over 1 trillion won. Homeplus had been using a sale-and-leaseback strategy to secure funds by selling its stores and leasing them back. However, with the company now under court management, its ability to pay rent and sell properties has become uncertain. Financial authorities have launched a review of real estate funds backed by Homeplus assets.
