Financial woes deepen as DIP loan falls through, breaking 14-day severance rule
37 store closures, halted online delivery worsen cash crunch
![A Homeplus store in Seoul. [Herald DB]](https://wimg.heraldcorp.com/news/cms/2026/07/03/news-p.v1.20260519.bd9787dc94b84ac0a66605356eeedf33_P1.jpg)
Homeplus has delayed severance payments to former employees for the first time, after a failed attempt to secure 200 billion won ($129 million) in debtor-in-possession financing deepened the retailer's financial crisis and broke its commitment to pay within 14 days of departure.
Homeplus headquarters notified staff on Wednesday that it would be unable to pay severance on time to employees who left in mid-June.
"Due to the company's current cash shortage, the payment of severance and retirement benefits scheduled for today (the 2nd) has been unavoidably delayed," the notice read. "We sincerely apologize for the inconvenience and concern caused by this delay." The company added that it was "doing its utmost to ensure normal payment and will disburse the funds as quickly as possible once financing is secured."
It is the first time severance payments have been delayed since Homeplus entered court receivership in March last year. The company received 120 billion won from the sale of its Homeplus Express supermarket division to NS Home Shopping last month, but has still struggled to meet its severance obligations.
"The payment of severance has been delayed due to difficult cash conditions," a Homeplus official said. Under the Labor Standards Act, employers are required to pay all severance in full within 14 days of an employee's departure.
The crisis stems from the collapse of a plan to raise 200 billion won in external financing — a key condition for extending or terminating Homeplus's rehabilitation proceedings. Homeplus had asked its largest creditor, Meritz Financial Group, for a 200 billion won DIP loan, but Meritz approved only half that amount, 100 billion won, and placed even that in an escrow account contingent on a personal guarantee from Kim Byung-ju, chairman of Homeplus's majority shareholder MBK Partners.
The Seoul Bankruptcy Court had earlier ordered Homeplus to present a financing plan worth 200 billion won by June 30. Homeplus submitted a revised rehabilitation plan to the court on the deadline, but the filing contained no financing proposal. The revised plan reflected the sale of Homeplus Express, the closure of 37 stores, and workforce reductions through natural attrition and voluntary redundancies.
Anxiety is mounting among frontline staff. "Nobody knows what will happen to the severance of people who left at the end of June," one official said. "A sense of despair is spreading, especially among middle-aged and older employees who have worked here for a long time." According to the Mart Industry Labor Union under the Korean Confederation of Trade Unions, 2,588 employees left in the first four months of this year alone, shrinking the workforce to 15,398 as of the end of April. With the supermarket division sold and departures continuing, the headcount had fallen to around 11,000 as of early this month.
The staff exodus reflects a rapidly deteriorating situation on the ground. Even after the decision to close 37 stores, the company's online delivery service — a key revenue source — was suspended, making it difficult to generate even the minimum income needed to maintain staff and stores. Even if the court extends the rehabilitation deadline to September, Homeplus will struggle to overcome its financial difficulties without external funding.
In the political arena, the Democratic Party of Korea and four other opposition parties recently convened a preparatory meeting to explore National Assembly mediation of the Homeplus crisis. A parliamentary hearing targeting MBK has been floated as a possibility, but observers say meaningful results are unlikely given delays in forming the Assembly's second-half standing committees. "Even if the relevant committee is formed and a hearing actually takes place, it will be August by then," one industry official said. "I wonder whether the stores will still be open by that point."
soho0902@heraldcorp.com
