Pickets calling for management normalization and denouncing current executives are displayed at the entrance of Homeplus headquarters in Gangseo-gu, Seoul. [Herald DB]
Pickets calling for management normalization and denouncing current executives are displayed at the entrance of Homeplus headquarters in Gangseo-gu, Seoul. [Herald DB]

Homeplus, whose corporate rehabilitation proceedings have been terminated, is expected to begin closing stores one by one this week and file for bankruptcy, effectively entering liquidation. The most pressing challenge now is minimizing the damage to suppliers, employees and tenant businesses.

Industry sources said Monday that Homeplus is expected to begin suspending operations at some stores sequentially as early as this week. The move comes as a cash crunch and staff departures have made normal store operations increasingly difficult. Over the weekend, half-price clearance sales drew long checkout lines, but the turnout fell well short of what would be needed to revive the rehabilitation process.

The Democratic Party of Korea's Euljiro Committee summoned MBK Partners and Meritz Financial Group on Thursday, urging them to secure emergency operating funds and draw up a recovery plan. No concrete financing arrangement has been reached, however.

Homeplus is now widely expected to file for bankruptcy with the court after suspending store operations. The window to file an immediate appeal runs through July 20, and industry observers believe Homeplus will submit a bankruptcy petition no later than Thursday.

Homeplus is particularly expected to pursue a "connected bankruptcy" — a procedure linked to the rehabilitation process — rather than a standard bankruptcy filing. Connected bankruptcy allows a court to declare a company bankrupt simultaneously with the termination of rehabilitation proceedings, either at the company's request or on the court's own authority, preventing a company whose rehabilitation has been halted from being left in limbo. Under connected bankruptcy, the priority of public-interest claims accumulated during rehabilitation is preserved.

If Homeplus instead proceeds with a standard bankruptcy after the appeal period expires and the termination of rehabilitation becomes final, the legal standing and repayment procedures for public-interest claims could change, creating potential confusion.

In earlier retail insolvency cases — including that of WeMakePrice — courts frequently followed the connected bankruptcy route to protect public-interest creditors. In some instances, companies themselves filed for connected bankruptcy to safeguard the rights of public-interest creditors who had supported them during rehabilitation.

Homeplus's public-interest claims are currently estimated at around 1 trillion won ($665 million). A significant portion consists of unpaid supplier invoices and back wages that arose after rehabilitation proceedings began.

With virtually no liquid assets remaining outside the real estate on which the Meritz Financial-led creditor council holds collateral rights, conflict among stakeholders — including suppliers, tenant businesses and junior creditors — over debt recovery appears unavoidable.

Because the legal standing of public-interest claims hinges on whether connected bankruptcy is pursued, the issue is expected to draw intense scrutiny from the very start of the bankruptcy process.

If the court accepts the bankruptcy petition, a trustee will be appointed alongside the bankruptcy declaration, and asset disposal and debt repayment will proceed in sequence. However, Meritz Financial and other members of the creditor council hold collateral rights over major assets, meaning asset disposal and debt recovery are expected to take considerable time.

Homeplus filed for court receivership in March last year and attempted to raise liquidity through measures including the sale of its Homeplus Express unit, but failed both to sell the core business and to secure new financing. Once a bankruptcy petition is filed, the focus of the Homeplus saga is expected to shift from the possibility of revival to minimizing stakeholder losses and carrying out an orderly liquidation.

The Homeplus headquarters building in Gangseo-gu, Seoul. [Herald DB]
The Homeplus headquarters building in Gangseo-gu, Seoul. [Herald DB]

spa@heraldcorp.com