Homeplus seeks to fix controversy over issuing empty shell bonds
MBK chief pledges personal wealth to aid small suppliers
Homeplus, the country's second-largest hypermarket chain, said on Monday it is committed to fulfilling its financial obligations by repaying all creditors and investors impacted by the firm's initiation of court-administered rehabilitation proceedings.
'We deeply apologize for the temporary postponement of some debt repayments, including the securitization of accounts payable, due to the commencement of the rehabilitation procedure,' the firm said in a statement. 'We will negotiate with securities companies and others with the goal of paying all debts in full without avoiding responsibility.'
The retailer filed for court-led rehabilitation on March 4 to alleviate its short-term debt burden following a credit rating downgrade, putting some 19,000 employees, 6,000 suppliers and partners, as well as its investors in jeopardy.
Homeplus said it has already paid 351 billion won ($242.5 million) in accounts receivables, including supply payments to small businesses and settlement of rental stores, and plans to finalize all supply contracts with major suppliers within this week.
Regarding asset-backed short term bonds, or ABSTB, which have sparked controversy concerning their potential impact on individual investors, the company said that it will repay the full amount in accordance with the rehabilitation process.
Homeplus has transferred the payment for delivered goods to a mid-sized stock brokerage house, Shinyoung Securities, as accounts receivable from the credit card company. The securities firm then securitized the amount and sold it to retail investors as a form of ABSTB.
The total amount of ABSTB issued by Homeplus in January and February before it filed for corporate rehabilitation is estimated at some 289.1 billion won, including 151.8 billion won in February, the highest in the last two years on a monthly basis.
Financial authorities are investigating whether Homeplus and its major shareholder MBK Partners continued to issue short-term bonds despite being aware of the credit rating downgrade.
The retailer is suspected of issuing 82 billion won worth of ABSTB on the same day its rating was slashed from A3 to A3- on Feb. 25.
On Sunday, MBK Partners, a private equity fund that owns Homeplus, said its founder and Chairman Michael Byung-ju Kim will use his personal assets to help small business owners avoid pitfalls from the ongoing corporate rehabilitation.
'Chairman Kim will provide financial support so that we can make quick payments to small business partners who are expected to face difficulties,' it said in a statement.
MBK's decision came amid growing calls that the firm take more responsive actions with critics alleging that the PEF opted to put Homeplus under rehabilitation only to mitigate its investment losses rather than address the underlying operational challenges facing the retailer, which runs 126 hypermarkets and 310 supermarkets nationwide.
The specific amount of private funds to be contributed by Kim or the remaining unpaid balance of Homeplus has not yet been disclosed. Market experts estimate that Homeplus needs at least 1 trillion won in capital infusion to normalize its operations.
'We are currently estimating the total amount needed to pay small business owners, and will finalize the payment schedule in consultation with shareholders as soon as the calculation is completed,' a Homeplus official said.
The MBK chairman's fund is likely to be used to pay for overdue delivery payments and settlement amounts.
The National Assembly summoned the MBK head to attend an urgent inquiry into the Homeplus scandal on Tuesday, but he chose not to appear, citing that he doesn't participate in the management of individual companies in which investment has been completed.
MBK and Homeplus are required to submit a rehabilitation plan, approved by creditors, to the court by June 3.
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