Homeplus suspended operations on July 13. The entrance to the Homeplus branch in Gangseo-gu, Seoul, is seen blocked by shopping carts on Monday. [Yonhap]
Homeplus suspended operations on July 13. The entrance to the Homeplus branch in Gangseo-gu, Seoul, is seen blocked by shopping carts on Monday. [Yonhap]

Even as Homeplus scrambled to secure 200 billion won ($135 million) in debtor-in-possession financing and filed an immediate appeal against the Seoul Bankruptcy Court's decision to terminate its rehabilitation proceedings, card companies have moved to withhold merchant payments in the wake of the store closures that began July 13.

Most card companies began suspending merchant payments to Homeplus last week, when the retailer halted operations at all of its stores nationwide, according to financial industry sources Tuesday. Some card companies have adopted a policy of withholding only the portion of payments corresponding to canceled transactions, rather than the full amount. The timing of the suspensions varies by company.

Card companies had previously suspended payments once before — immediately after the Seoul Bankruptcy Court ruled on July 3 to terminate Homeplus's rehabilitation proceedings, as cancellation requests surged. Payments resumed after the volume of cancellations subsided, but the companies halted them again when Homeplus suspended operations on July 13. The move is seen as an effort to set aside a portion of pre-closure sales revenue as a reserve to cover potential refunds.

"Customers continue to request cancellations — whether out of concern that high-end appliances won't be delivered or to get refunds on unused cultural center memberships," an official at one card company said. "With operations suspended, new payment inflows are shrinking while refund amounts are growing, so we halted payments as a risk management measure."

Under the current payment structure, when a customer pays by card, the card company remits the funds to the merchant first and then bills the customer on the settlement date. In the case of a cancellation, the card company refunds the customer first and then recovers that amount from the merchant. Given Homeplus's current financial situation, however, card companies consider it unlikely they would be able to recoup those refunds — prompting them to take preemptive action.

Under standard card merchant agreements, card companies may withhold payments when a merchant undergoes a material business change equivalent to the filing of a rehabilitation or bankruptcy petition under the Debtor Rehabilitation and Bankruptcy Act, or a suspension of transactions by a bill-clearing house.

Meanwhile, card companies have also been moving to halt the issuance of new Homeplus co-branded cards. KB Kookmin Card suspended new issuances from July 10, and Shinhan Card followed from July 14. Samsung Card is currently the only issuer still offering the co-branded card.

After the court ruled to terminate rehabilitation proceedings, Homeplus filed an immediate appeal on Monday, backed by a joint guarantee and DIP loan agreement with major shareholder MBK Partners and Meritz Financial Group. Homeplus has said it plans to resume operations as soon as the rehabilitation proceedings are extended and the DIP funds are disbursed. Should operations normalize, card companies are expected to revisit their payment suspension measures as well.


won@heraldcorp.com