Seoul Bankruptcy Court terminated the corporate rehabilitation procedure for Homeplus on July 3, citing the company's failure to secure the minimum 200 billion won in debtor-in-possession (DIP) financing required to execute its rehabilitation plan. The court's decision followed a two-month deadlock between MBK Partners and Meritz Financial Group over DIP funding responsibilities, with Meritz conditioning its 100 billion won contribution on guarantees from MBK Partners and Chairman Kim Byung-joo that were submitted but not executed by the July 3 deadline. The termination came despite Homeplus's successful sale of its Express division in April, leaving the DIP financing as the sole unresolved obstacle to rehabilitation plan approval. The court granted a 14-day immediate appeal period, setting July 20 as the final deadline for Homeplus to either secure DIP financing or complete a merger-and-acquisition deal for its remaining business units to avoid entering bankruptcy proceedings.
Seoul Bankruptcy Court Terminates Homeplus Rehabilitation Procedure
Seoul Bankruptcy Court announced on July 3 that it terminated Homeplus's rehabilitation procedure because "approximately 200 billion won in DIP financing is minimally required to execute the rehabilitation plan, yet this has not been secured to date." The court stated that "the rehabilitation plan lacks feasibility, leading to the decision to terminate the rehabilitation procedure." The decision was characterized by industry observers as a "surprise ruling" that none of the parties—Homeplus, MBK Partners, or Meritz Financial Group—anticipated. The court granted an additional 14-day immediate appeal period, meaning Homeplus must resolve either DIP financing or the sale of its remaining business units by July 20.
MBK Partners and Meritz Financial Group Dispute DIP Financing Terms
Meritz Financial Group offered to provide 100 billion won of the required DIP financing on the condition that MBK Partners and Chairman Kim Byung-joo provide guarantees. MBK Partners submitted an opinion to the court early this week indicating Chairman Kim's joint guarantee would be implemented, but the actual guarantee was not executed by July 3. Homeplus stated in a release on July 3 that "despite numerous pleas from stakeholders over the past few weeks, Meritz Financial Group has refused to provide funding, claiming that the 100 billion won joint guarantee provided by MBK Partners and Partner Kim Byung-joo is insufficient." Meritz responded that it "fulfilled its role as a creditor within the scope permitted by law, including depositing 100 billion won in DIP escrow," adding that "MBK must fulfill its responsible role during the remaining two weeks."
Industry sources report that both parties have not contacted each other separately since a closed-door meeting at the National Assembly on May 9. One industry official noted that "while there were discussions every weekend between both parties since the rehabilitation procedure began in March of last year, there were no communication attempts during the past few weeks when DIP procurement was urgent." The official added that "this rehabilitation plan was also complacently thought to receive a court extension until September without a procurement plan."
Court Sets July 20 Deadline for DIP Resolution or M&A Completion
If Homeplus fails to resolve both DIP financing and mergers-and-acquisitions by July 20, the rehabilitation procedure will be finalized as terminated and Homeplus will enter bankruptcy proceedings. Even if the rehabilitation procedure is terminated once, reapplication is possible. However, given that the rehabilitation procedure has already failed, unless the financial situation rapidly improves, the likelihood of the court accepting a rehabilitation reapplication is extremely slim. Industry observers note that even if a definite acquirer emerges for the remaining business units without DIP financing, the rehabilitation procedure could be initiated, but resolution within two weeks is considered difficult.
FAQ
What did Seoul Bankruptcy Court decide about Homeplus on July 3?
Seoul Bankruptcy Court terminated Homeplus's corporate rehabilitation procedure on July 3, citing the company's failure to secure the minimum 200 billion won in debtor-in-possession financing required to execute its rehabilitation plan. The court granted a 14-day immediate appeal period, setting July 20 as the final deadline for resolution.
Why did MBK Partners and Meritz Financial Group fail to provide DIP financing?
Meritz Financial Group conditioned its 100 billion won contribution on guarantees from MBK Partners and Chairman Kim Byung-joo. MBK Partners submitted guarantee intentions to the court early this week, but the actual guarantee was not executed by July 3. The two parties have not contacted each other since a National Assembly meeting on May 9, leading to a two-month deadlock over financing responsibilities.
What happens if Homeplus does not meet the July 20 deadline?
If Homeplus fails to secure DIP financing or complete a merger-and-acquisition deal for its remaining business units by July 20, the rehabilitation procedure termination becomes final and Homeplus will enter bankruptcy proceedings. While reapplication for rehabilitation is possible, the court is unlikely to accept it unless the financial situation rapidly improves.
