EXPLAINER How $133 mil. funding dispute between MBK, Meritz pushed Homeplus toward collapse
A notice announcing a temporary closure is posted at a Homeplus store in Seoul, Monday. Yonhap
Once Korea’s second-largest discount store operator, Homeplus decided to temporarily close stores beginning Monday after running out of cash, leaving it unable to pay suppliers or even cover basic operating expenses.
The retailer now faces an uncertain future after the Seoul Bankruptcy Court terminated its rehabilitation proceedings earlier this month. Without an immediate 200 billion won ($133 million) cash injection, industry observers say it is effectively on the path toward liquidation unless a last-minute rescue materializes.
Why $133 million?
So why has 200 billion won become the figure that could determine Homeplus’ fate?
The number represents the minimum amount the court said the company needed to carry out its restructuring plan.
After years of struggling with the decline of Korea’s hypermarket sector and consumers’ shift to online shopping, Homeplus — owned by private equity firm MBK Partners — initially sought a buyer.
But no deal materialized.
One hurdle was an accounting assessment that valued the company more highly in liquidation than as a going concern — by more than 1 trillion won — making an acquisition far less attractive. Buyer interest was further dampened by the bleak outlook for brick-and-mortar discount retailers, battered by the rapid rise of e-commerce and lasting shifts in shopping habits since the COVID-19 pandemic.
With a sale out of reach, Homeplus sought court protection in March last year.
As a condition for approving its rehabilitation plan, the court concluded that the company needed to secure at least 200 billion won in fresh funding. Homeplus subsequently submitted a restructuring proposal that relied on that financing and called for sweeping cost cuts, including shuttering nearly half of its stores and reducing its workforce.
But in the end, it failed to secure the money, and on July 3 the Seoul Bankruptcy Court ended the rehabilitation process.
Why couldn’t Homeplus raise money?
The biggest sticking point was a standoff between MBK Partners and Homeplus’ largest creditor, Meritz Financial Group, over who should shoulder the financial burden.
Meritz maintained that it would provide no more than 100 billion won — half the amount required under the restructuring plan — and only if the loan was backed by personal guarantees from both MBK Partners and its chairman, Michael ByungJu Kim.
The private equity firm initially rejected the demand, describing the requirement for a personal guarantee as highly unusual. It later agreed to the condition, but said the court’s timetable left insufficient time to complete the financing.
A Homeplus banner is displayed outside a store in Seoul. Yonhap
Analysts say the dispute reflected broader skepticism over whether another cash injection would have been enough to save the cash-strapped retailer.
Even if the funding had been secured, Homeplus still needed a buyer to ensure its long-term survival. After more than a year of failed sale attempts, creditors had begun to question whether another capital injection would do anything more than delay the inevitable. Meanwhile, the company’s brand has continued to lose value while its operations have become harder to sustain, further dimming the prospects for a turnaround.
The pressure has also been compounded by a surge in administrative claims — obligations incurred after court-led rehabilitation begins, such as payments to suppliers, employee wages and taxes, which must be repaid in full.
Although Homeplus completed the sale of Homeplus Express, its smaller-format supermarket business, administrative claims had ballooned to more than 1 trillion won as of May.
That has reinforced doubts that 200 billion won would have been enough to pull the company through its liquidity crunch.
Did MBK’s ownership contribute to crisis?
Homeplus’ collapse has also renewed scrutiny of MBK Partners’ decade-long ownership.
The private equity firm acquired the retailer from Tesco in a leveraged buyout in 2015. The overall transaction was valued at 7.2 trillion won, although MBK itself paid around 6 trillion won. Following the deal, Homeplus carried 4 trillion won in debt, including acquisition financing and existing borrowings.
Over the next decade, MBK relied heavily on store sales and other asset disposals to pare down that debt. Critics argue the strategy came at the expense of long-term investment in the core business, leaving Homeplus ill-equipped to compete with rivals as more consumers migrated online.
MBK disputes that assessment, saying proceeds from asset sales were reinvested in Homeplus’ business, particularly its digital operations. According to the firm, the retailer’s online division grew to generate more than 2 trillion won in annual sales.
What happens next?
Homeplus still has a narrow window to reverse its fortunes.
The company has until July 20 to appeal the Seoul Bankruptcy Court’s decision, leaving time to secure emergency funding or attract a strategic investor that could revive rescue efforts, potentially with government-backed financial support.
For now, however, attention appears to be shifting from turnaround efforts toward limiting the fallout from a potential liquidation.
The Ministry of Finance and Economy has already announced 440 billion won in emergency liquidity support for small suppliers affected by the retailer’s collapse.
If the court's decision becomes final, the consequences will extend far beyond the retailer itself.
More than 13,000 employees stand to lose their jobs. Wage payments have already been delayed for months, with unpaid wages now exceeding 100 billion won. Severance payments have also been pushed back.
And beyond the workforce, the ripple effects would reach thousands of suppliers, tenants, delivery workers and investors. More than 4,600 vendors do business with Homeplus, and some estimates put the total number of people exposed to the collapse at nearly 100,000.
The coming days could determine whether Homeplus can still be rescued, or whether it becomes one of the biggest corporate failures in Korea’s retail industry.