Homeplus Express sold, measures to continue for rehabilitation

A Homeplus Express store in Seoul, April 22 / Yonhap

Homeplus, an ailing Korean retailer undergoing rehabilitation proceedings, sold its supermarket chain Homeplus Express to NS Home Shopping.

Despite the sale, the discount chain remains desperate to secure more cash, announcing a series of restructuring measures on Friday to pay wages and maintain operations.

The company said it will temporarily close 37 underperforming Homeplus stores on Sunday to concentrate on the remaining 67 stores.

Homeplus said the measure is to prioritize supplying limited product quantities to key stores first, so that it can restore customer trust and prevent sales declines at key outlets. Since January, the company’s financial difficulties have escalated into a liquidity crunch, prompting partner firms to halt supplies over concerns about delayed payments, leaving some shelves partially empty and reducing customer traffic in some stores.

"Closure of the stores was an unavoidable decision due to the difficulty in supplying sufficient products to all stores, as major trading partners have tightened supply terms following the commencement of the rehabilitation procedures," a Homeplus official said.

"As of now, a significant number of stores are experiencing customer loss due to product shortages, with sales dropping by more than 50 percent compared to the previous year."

Four out of 15 stores in Seoul and four out of seven stores in Busan will be closed. The company said employees at the closing stores will be given 70 percent of their regular stipends.

The downsizing announcement came a day after the company announced the sale of Homeplus Express to NS Home Shopping. While the exact value of the deal was not disclosed, NS Home Shopping will assume part of Homeplus Express’ debt, while Homeplus is expected to secure 120.6 billion won ($82.2 million) in proceeds from the transaction.

Homeplus said it expects the proceeds from the sale to take around two months to be fully received and that the amount is insufficient to meet the minimum capital required for its court receivership plan.

A court receivership plan is a document submitted by a debtor to the court detailing how it intends to repay its debts. Based on the plan, the court determines whether the company is worth more through liquidation or by continuing operations after repaying its debts. Following the sale, the Seoul Bankruptcy Court decided to extend the deadline for approval of Homeplus’ receivership plan to July from the initial May 4 deadline.

To secure cash, Homeplus has also requested to its largest creditor, Meritz Financial Group, for a short-term loan and debtor-in-possession financing. However, the company said the group has not responded as of Friday.

Meritz, according to Homeplus, currently holds 68 Homeplus stores altogether worth 4 trillion won as collateral for having committed a 1.2 trillion won loan to Homeplus.

“As we entered the rehabilitation procedures, all funds we managed to secure through the sale of assets, such as real estate, are now being used for repaying Meritz loans, making it challenging for us to even secure a minimum operating fund," the Homeplus official said. "Without financial support from Meritz, which effectively holds as collateral virtually all Homeplus assets that can be liquidated, rehabilitation is practically impossible.”