Homeplus desperate for loan from creditor Meritz amid financial crisis

Ruling Democratic Party of Korea lawmakers and representatives of the Joint Countermeasure Committee for Homeplus protest Homeplus' shutdown of 37 stores during a press conference at the National Assembly in Yeouido, Seoul, May 11. Yonhap

Homeplus, an ailing Korean retailer undergoing a rehabilitation process, said Sunday it has once again urged its largest creditor, Meritz Financial Group, to approve a loan to sustain immediate business operations.

The discount chain store operator earlier this month made the same request to Meritz but did not receive any response.

As part of efforts to secure liquidity, Homeplus recently sold its smaller supermarket unit Homeplus Express, and temporarily suspended operations at 37 of its 104 main stores on May 10.

The company, however, said in its latest statement that under its current financial predicament it can no longer afford to run its remaining stores. The company delayed paying wages starting last month.

“Since Meritz has secured most of our major assets as collateral, there is no way for us to independently secure operating funds. At this point, Meritz is the only entity that can provide emergency operating fund loans,” the statement said.

“It is nearly impossible for a retail company to normalize its business once its operations are suspended. If even the remaining 67 stores eventually halt operations, it will be difficult to continue the rehabilitation proceedings. If those are terminated, it is highly likely to transition immediately into liquidation proceedings.”

Despite Homeplus’ distress call, Meritz is reportedly demanding firm repayment guarantees from Homeplus and its current owner, MBK Partners, amid concerns over potential risks such as breach of trust.

Homeplus secured 120.6 billion won ($82.2 million) in proceeds from selling Homeplus Express, but the retailer has reportedly failed to secure the necessary operating funds before the remaining payment from the sale is received, prompting requests to Meritz for a short-term loan and debtor-in-possession financing. Meritz currently holds 68 Homeplus stores, together valued at 4 trillion won, as collateral for a 1.2 trillion won loan extended to the retailer.

Currently, Homeplus is seeking approval from the Seoul Bankruptcy Court and creditors for its plan to repay its debts. Based on the plan, the court will determine whether the company is worth more through liquidation or continued operations after repaying its debts. The court will make its decision on July 3.