Homeplus faces fresh funding needs on road to recovery

Homeplus still faces additional financing needs to service its massive debt obligations and sustain its long-term rehabilitation after resuming normal operations last week with a 200 billion won ($143 million) emergency credit line, industry officials said Thursday.

According to the company’s second revised rehabilitation plan, the retailer, which was pushed to the brink of bankruptcy, plans to raise a total of 1.42 trillion won by selling about 20 company-owned stores by 2028. However, even liquidating a large portion of its store portfolio will not be enough to cover its funding needs throughout the rehabilitation period.

The firm faces a key test in February 2030, when 812 billion won in administrative claims will come due, including 398 billion won in supplier payments and 100 billion won in unpaid rent.

Homeplus plans to cover the shortfall by taking out 592 billion won in new loans collateralized by its remaining property assets.

To secure bank financing, Homeplus must engineer a dramatic financial turnaround. The company projects an operating loss of 10.3 billion won on revenue of 3.38 trillion won for the fiscal year ending February 2028. In contrast, it projects revenue to grow 22 percent to 4.12 trillion won the following year, with operating profit swinging back into the black at 124.2 billion won.

This means Homeplus must boost its annual revenue by about 743.9 billion won and improve its operating result by around 134.5 billion won within a single year.

The funding pressure will not end there. Homeplus is set to face another major financing requirement toward the end of its rehabilitation program, with repayments of ordinary rehabilitation claims, including card-related claims and trade receivables, scheduled to begin in 2032.

Homeplus on Thursday also disclosed a plan to secure about 1.5 trillion won in additional collateralized loans to fund repayments to creditors as part of its long-term turnaround efforts.

“We will start selling 19 of the 37 company-owned stores earmarked for closure once the rehabilitation plan receives court approval, with the sales targeted for completion by February 2028,” a company official said.

The official said the firm plans to use proceeds from the sale of the 19 company-owned stores to fully repay trust-backed creditors, which would release the collateral and allow the remaining properties to be used as collateral for additional loans. It also plans to leverage 38 remaining company-owned stores valued at about 2.8 trillion won to raise funds for creditor repayments in 2030 and 2037, starting with a relatively small loan in 2030 before increasing the size of its borrowing in 2037 to repay outstanding claims, including the earlier debt.

“We expect all 67 stores to be fully operational by 2030, when the first loan is expected to be drawn, generating about 4.3 trillion won in annual revenue and 162.8 billion won in operating profit,” the official said. “By 2037, operating profit is projected to rise to 218.2 billion won, allowing us to generate 150 billion to 300 billion won in annual free cash flow and comfortably service our debt without placing undue pressure on operations.”

Homeplus has been under court-led rehabilitation proceedings since March 4 last year.

The Seoul Bankruptcy Court has scheduled a creditors’ meeting for Sept. 2 to review and vote on the retailer’s revised rehabilitation plan, two days before the Sept. 4 deadline for the court to approve the plan.

Initial sales figures following the reopening of the stores brought some short-term relief.

Homeplus reported total sales of 43.7 billion won during the first five days of its reopening, from Aug. 13-17, up 191 percent from the five-day period preceding its temporary operational halt in early July. Average daily foot traffic rose 74 percent to nearly 240,000 visitors.