SEOUL, South Korean discount retailer Homeplus Co., facing financial difficulties, announced Wednesday it will shut 15 stores as part of emergency management efforts in response to a challenging business environment.
The company has been under a court-led rehabilitation program since March, following downgrades of its corporate bonds from A3 to A3- by two local credit rating agencies due to deteriorating financial health. Homeplus is required to submit its formal rehabilitation plan to the Seoul Bankruptcy Court by Sept. 10.
Court-appointed accounting firm Samil PricewaterhouseCoopers recommended an M&A auction prior to court approval of the plan, noting that the company’s liquidation value exceeds its ongoing business value. The court has accepted this recommendation.
Homeplus has faced declining sales amid weak consumer confidence, reduced supplier transactions, and demands for advance payments, creating potential liquidity challenges.
“If the current situation continues, the company’s revival through an M&A before court approval of the rehabilitation plan could be at risk,” co-CEO Joh Joo-yun said in a message to employees. He added that the emergency management measures are intended to stabilize operations and protect the jobs of Homeplus’ 22,000 employees and subcontractors.
Joh and Kim Kwang-il, vice chairman of MBK Partners, serve as court-designated managers overseeing the restructuring. MBK Partners acquired Homeplus in 2015 from British retailer Tesco Plc for 7.2 trillion won (US$5.2 billion). Homeplus currently operates 125 stores across South Korea.
