Kintex store tenant occupies shop after receiving eviction notice amid unpaid electricity bills

200 billion won DIP injection fails to stem losses as M&A prospects remain unclear

Notices of impending electricity cutoffs are posted on the entrance of a Homeplus store in Goyang, Gyeonggi Province, on Tuesday, after Korea Electric Power Corporation issued disconnection warnings to a number of Homeplus locations over unpaid utility bills. [Yonhap]
Notices of impending electricity cutoffs are posted on the entrance of a Homeplus store in Goyang, Gyeonggi Province, on Tuesday, after Korea Electric Power Corporation issued disconnection warnings to a number of Homeplus locations over unpaid utility bills. [Yonhap]

"I ran this shop for nearly five years, and they told me to pack up and leave with just one week's notice. I had no choice but to stay and occupy the space — once the doors are locked, there's no getting back in."

The owner of a key-cutting and locksmith shop inside Homeplus's Kintex branch has been sleeping in the empty store since Tuesday. The Kintex location was scheduled for a power cutoff Wednesday after failing to pay electricity bills for more than two months. Once the power is cut, the store is expected to close permanently. Speaking by phone Thursday, the tenant said the unpaid deposit owed amounts to between 20 million and 30 million won ($22,500), adding, "At the very least, they should return our deposits before pushing us out." By holding the space, the tenant pushed back the Kintex cutoff to Friday.

The Kintex branch is not the only location facing a power cutoff. According to the Homeplus Tenant Business Owners' Association, disconnection notices have been issued to the Centum City, Banyeo, Jamsil, Goyang Terminal, Pocheon Songwu, Namyangju Jinjeop, Gajwa, Jinju, Masan and Paju Unjeong branches. The cutoffs are scheduled to begin as early as the end of this month and run through mid-November. These stores were among those slated for closure in July, yet tenants have remained open for business. Another tenant said, "We paid electricity and maintenance fees every month right up until the closure — and we have no idea where that money went."

The situation points to a renewed deterioration in Homeplus's finances. After rehabilitation proceedings were suspended in July, Homeplus secured 200 billion won in debtor-in-possession financing following protracted negotiations with Meritz Financial Group, allowing the proceedings to resume. The Seoul Bankruptcy Court approved a rehabilitation plan in September — yet the company has been unable to overcome its financial difficulties and is effectively back to square one.

The primary driver is a sharp decline in store sales. After 67 locations resumed operations in August, Homeplus posted 43.7 billion won in sales over the first weekend — a brief spike — but revenue has since fallen well short of targets. Unresolved payment disputes with suppliers have trapped the company in a vicious cycle: insufficient stock leads to fewer customers, which drives down sales, which leaves even less money to pay suppliers. The decisions by key tenants CJ Olive Young and Daiso to pull out have dealt a further blow to foot traffic.

Homeplus has been running a series of discount events to raise cash. On Thursday, the chain launched a week-long autumn sale offering Korean beef and samgyeopsal at half price. But E-mart and Lotte Mart are holding their own major discount events around the same time — on Nov. 10 and Nov. 14, respectively. One industry official said, "Unlike its competitors, Homeplus cannot participate in government-backed agricultural discount programs or co-branded card promotions, so it will be very difficult to see any meaningful boost in sales."

The final list of employees set to leave under a voluntary redundancy program by the end of this month has also yet to be announced. The program offers no severance bonus — only unpaid wages, a chuseok bonus and statutory retirement pay. Even so, about 400 employees applied, and the application window closed early, running from Oct. 7 to Oct. 14. The delay in finalizing the list is widely attributed to the company's ongoing financial constraints.

A potential sale of Homeplus — the last remaining hope — has shown no signs of progress. The company is pursuing mergers and acquisitions covering the real estate of 19 closed stores as well as its operating hypermarkets, headquarters and online business division. With the deadline for letters of intent approaching at the end of this month, no prospective buyers have emerged. If no acquirer comes forward, bankruptcy is considered the most likely outcome. "Without government payment guarantees or administrative support, it will be very difficult for the company to regain its competitiveness," one industry official said.

MBK Partners, Homeplus's former majority shareholder, has also walked away. Last month, MBK Partners canceled all of its Homeplus shares without compensation. Vice Chairman Kim Gwang-il stepped down as co-CEO of Homeplus and relinquished the role of rehabilitation administrator as well, severing the legal ties between MBK Partners and Homeplus entirely. Only CEO Jo Ju-yeon remains listed as rehabilitation administrator.

A Homeplus store in Seoul sits nearly empty. [Yonhap]
A Homeplus store in Seoul sits nearly empty. [Yonhap]

soho0902@heraldcorp.com