South Korean superstore chain Homeplus, which filed for court receivership at the Seoul Bankruptcy Court on March 4, projected that it could face a cash shortage within two weeks and may be short of over 700 billion won by the end of May. The discount retailer’s financial situation is so strained that it cannot survive without securing short-term funding, such as commercial paper. This move came just one business day after its credit rating was downgraded.
According to Homeplus' court filing obtained on March 20, the company said, “We faced a cash shortfall of 18.4 billion won on March 17, and the situation has worsened. By the end of May, we expect the shortfall to reach 739.5 billion won ($505 million).”
When a company applies for court receivership, a separate administrator is sometimes appointed. However, the court allowed Homeplus' co-CEOs, Joh Ju-yeon and Kim Kwang-il, to remain in charge. In its filing, Homeplus suggested that if a single administrator were appointed, Kim would be the best fit. Kim is also vice chairman of MBK Partners, the private equity firm that acquired Homeplus in 2015. Industry insiders see this as a sign that MBK is still firmly in control.
Homeplus told the court it plans to turn things around by negotiating lower interest rates with creditors and adjusting lease terms for its stores. “The rehabilitation plan will be finalized once we get approval from creditors and the court,” the company said.
Homeplus is struggling to reassure suppliers as concerns grow over missed payments. On March 20, Seoul Dairy Cooperative, the country’s largest dairy supplier, told distributors it would stop delivering to the superstore chain. Nongshim, the leading instant noodle maker, also halted deliveries of some products on March 19. These suppliers are demanding upfront payment before resuming shipments. Homeplus responded, “With outstanding payments to multiple suppliers and tenants, we can’t meet demands for advance cash payments. We’re working to resolve this as soon as possible.”
