MBK chairman says no more personal contributions for Homeplus rescue

MBK Partners Chairman Michael ByungJu Kim / Courtesy of MBK Partners

Michael ByungJu Kim, chairman of MBK Partners — the private equity firm that owns Homeplus — has said he will refuse to comply with calls for a personal contribution of more than 1 trillion won ($724 million) to support the retailer, which is under a court-led rehabilitation process, according to sources in political circles and the financial investment industry, Thursday.

During a closed-door meeting with lawmakers from the National Assembly's National Policy Committee on June 13, Kim maintained that MBK's plan to forfeit its entire 2.5 trillion won stake in Homeplus to facilitate the sale represents the best possible offer, sources said.

However, as some critics continue to argue that an immediate capital injection is essential to swiftly normalize the retailer's operations, further controversy is expected.

Homeplus ranks as Korea's second-largest discount retail chain, with a network of 126 large-scale stores and 308 smaller outlets nationwide. It has a workforce of around 19,000 employees.

In 2015, MBK acquired Homeplus from British retailer Tesco for 7.2 trillion won. After accounting for 1.2 trillion won in existing debt, the actual acquisition price was 6 trillion won.

However, due to a prolonged slump in the retail industry, the private equity firm was unable to sell the supermarket chain for over a decade. Continued financial struggles and credit rating downgrades eventually led Homeplus to file for court-led corporate rehabilitation with the Seoul Bankruptcy Court on March 4.

On June 12, court-appointed accounting firm Samil PwC concluded that Homeplus' liquidation value exceeds its going-concern value by more than 1.2 trillion won. Based on this finding, the company is now seeking a buyer ahead of the court's decision on whether to approve its rehabilitation plan.

According to sources, Kim told lawmakers that while MBK is willing to fully support the sale of Homeplus by forgoing its entire investment of 2.5 trillion won, he cannot agree to contribute more from his personal funds.

He also indicated that if a new buyer cannot be found, he would seek to avoid liquidation and instead work with creditors to pursue an independent rehabilitation process.

Investors who face losses after purchasing Homeplus short-term bonds hold a demonstration in front of the War Memorial of Korea in Seoul, June 12, calling for strict punishment of MBK Partners executives. Yonhap

The retailer faces 2.9 trillion won in debt and other management challenges, including creditor compensation. Industry estimates suggest that about 1.7 trillion won is needed to revive the company.

Some politicians and labor groups have demanded that MBK and Chairman Kim take responsibility and invest more than 1 trillion won in Homeplus.

Market opinion is divided over Kim's refusal to make additional personal contributions.

Some argue that forfeiting shares in a struggling company with plunging value and presenting it as a major sacrifice is merely symbolic, while others contend there is no legal basis to compel major shareholders to make large personal contributions.

According to MBK, Kim has already donated 40 billion won of personal funds to help repay debts to small business partners and provided a 60 billion won loan guarantee for Homeplus.