Homeplus, one of the country’s largest retail chains, filed for court receivership on March 4. (Image courtesy of Yonhap)
SEOUL, March 5 (Korea Bizwire) — In a move that has sent shockwaves through South Korea’s retail industry, Homeplus, one of the country’s largest retail chains, filed for court receivership on March 4, citing concerns over potential liquidity issues that could affect vendor payments as early as May.
The bankruptcy filing has drawn criticism from industry observers who view it as a case of “winner’s curse” stemming from private equity firm MBK Partners’ leveraged buyout of the company in 2015. The 7.2 trillion won acquisition was largely financed through debt, with MBK investing 2.2 trillion won and borrowing the remaining 5 trillion won under Homeplus’s name.
“This is a moral hazard situation,” said one industry insider, speaking on condition of anonymity. “Filing for court protection before any actual default on vendor payments or interest payments suggests MBK is attempting to restructure financial obligations rather than address fundamental business issues.”
The retailer has been struggling with profitability since 2021, posting operating losses for three consecutive years: 133.5 billion won in 2021, 260.2 billion won in 2022, and 199.4 billion won in 2023. The company’s net loss in fiscal year 2023 reached 574.3 billion won, while the first three quarters of 2024 showed an operating loss of 157.1 billion won despite revenues of 5.3 trillion won.
The company’s financial strain has been exacerbated by the rise of e-commerce since the COVID-19 pandemic, a challenge faced by all brick-and-mortar retailers. However, Homeplus’s situation is particularly dire due to its heavy debt burden. As of November 2024, the company’s net debt stood at 5.31 trillion won, with a debt ratio of 1,408.6%.
According to a report by the Homeplus branch of the Mart Industry Labor Union, interest payments since MBK’s acquisition totaled 3.09 trillion won between 2016 and 2023, exceeding operating profits by 2.5 trillion won during the same period.
The company’s current financial obligations include 1.2 trillion won owed to Meritz companies, 110 billion won in bank credit lines, 250 billion won in commercial paper, and 350 billion won in delayed payments to suppliers. Homeplus maintains that its 4.7 trillion won in real estate assets should facilitate negotiations with financial creditors once a rehabilitation plan is confirmed.
Meritz Financial Group, a major creditor, stated that it holds first-priority beneficiary rights to Homeplus’s real estate assets through trust arrangements, rights they claim are unaffected by the bankruptcy proceedings.
The filing comes as another blow to South Korea’s retail sector, following payment defaults at e-commerce companies Tmon and Wemakeplus in July of last year. Some suppliers are now considering debt collection procedures, concerned about potential payment defaults.
Ashley Song (ashley@koreabizwire.com)
