Homeplus enters crucial test for turnaround as 67 stores reopen

Homeplus resumed normal operations at 67 stores on Thursday following a temporary shutdown brought on by the risk of liquidation, with its performance over the next three weeks likely to be critical to its survival, according to industry officials.

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.

Homeplus submitted its second revised rehabilitation plan to the court, Wednesday, with the upcoming creditors’ meeting expected to be a decisive turning point for the company.

Failure to secure approval for the plan could lead to the termination of the court-supervised rehabilitation process. The court would then determine whether Homeplus has a viable path forward before considering bankruptcy proceedings.

The reopening of the 67 stores comes about a month after they were temporarily closed as the company struggled to pay suppliers and landlords amid a shortage of operating funds.

The court initially moved to terminate Homeplus’ rehabilitation proceedings on July 3 after the retailer failed to raise the 200 billion won ($141 million) in operating funds needed to keep the process going, raising the prospect of bankruptcy.

The situation changed after the retailer secured emergency financing from its largest creditor, Meritz Financial Group, and appealed the court’s decision. The court subsequently overturned the termination decision July 21 and extended the rehabilitation proceedings, giving the retailer another opportunity to pursue a turnaround.

A rehabilitation plan must generally be approved within a year of the start of court proceedings, although the deadline can be extended by up to six months under exceptional circumstances. With Homeplus’ rehabilitation proceedings having begun on March 4 last year, the company is now facing what could be its final opportunity to avoid collapse.

Homeplus will need to prove to creditors that it has a credible path to recovery to win approval for its rehabilitation plan. With at least 75 percent of creditors by claim value required to back the plan, the retailer’s ability to demonstrate solid business performance over the next three weeks will be critical.

The company is seeking to rebuild its customer base through aggressive discount promotions while improving its operations by streamlining its store network.

“Homeplus appears to have drawn substantial crowds on the first day of reopening with steep discounts,” an industry official said. “The question now is whether it can maintain that momentum, which could determine the success of its rehabilitation efforts.”

The company also faces the challenge of rebuilding trust among customers and suppliers after a failed sale attempt, delays in securing emergency funding and store closures during the rehabilitation process.

Suppliers that continued deliveries despite not being paid are seeking measures to recover about 790 billion won in unpaid bills.

Including unpaid supplier bills, wages and taxes, Homeplus’ public interest claims are estimated at around 1 trillion won. As these claims take priority over rehabilitation claims, the sizable debt burden could make creditors more cautious about the company’s ability to repay its obligations under the rehabilitation plan.

Against this backdrop, Homeplus is downsizing its hypermarket network, with plans to sell properties at closed locations to raise funds for debt repayment and restructuring. It is also adopting a Trader Joe’s-inspired model, with smaller single-floor stores and a streamlined product mix centered on food, private-label goods and everyday essentials to boost efficiency and cash flow.