Latest news with #Homeplus'
Korea Herald
28-04-2025
- Business
- Korea Herald
Homeplus, MBK Partners HQs raided over controversial short-term debt sale
Prosecutors carried out a search and seizure operation at the headquarters of Korea's second-largest supermarket chain, Homeplus, and its largest shareholder, private equity firm MBK Partners, on Monday, as part of an investigation into alleged fraud and violations of the Capital Market Act. The Seoul Central District Prosecutors' Office announced that officials were dispatched to secure financial records in order to trace the flow of funds as Homeplus' financial health began to deteriorate after MBK Partners acquired the supermarket in 2015, culminating in losses of approximately 200 billion won ($138 million) in 2023. The retailer decided to apply to enter a rehabilitation program at the Seoul Bankruptcy Court on March 4. The search and seizure operation was conducted on suspicion of soliciting bond investments while deceiving investors, according to the prosecution. Prosecutors suspect that both Homeplus and its major shareholder, MBK Partners, had advance knowledge of the retailer's credit rating downgrade, but they continued to issue a large amount of short-term bonds and abruptly filed for rehabilitation, transferring the losses to investors and putting some 19,000 employees, 6,000 suppliers and partners in jeopardy. On Feb. 28, the Korea Investors Service downgraded Homeplus' credit rating from A3 to A3-, citing weak profitability, excessive debt and increasing uncertainty about the company's mid- to long-term competitiveness. Investigators believe Homeplus and MBK were informed about the rating downgrade at least by Feb. 25, when they received a preliminary notice from the credit agency. Despite knowing the company's rating was likely to decline, Homeplus issued asset-backed short-term bonds worth 82.9 billion won through Shinyoung Securities on Feb. 25. The prosecution reportedly claimed that selling bonds to investors in anticipation of corporate rehabilitation could be considered fraud, as such rehabilitation puts a hold on the financial procedures related to the debt, including interest payments. Four stock brokerage houses, including Shinyoung Securities, filed criminal complaints against Homeplus executives, alleging fraud for selling bonds while being aware of the rating downgrade and the upcoming corporate rehabilitation on April 1. The Financial Supervisory Service previously announced in a briefing on April 24 that it had secured concrete evidence that Homeplus and MBK Partners had been aware of the downgrade and planned to file for corporate rehabilitation for quite some time. South Korea's financial watchdog conducted an inspection into potential irregularities in the Homeplus scandal starting in mid-March, transferring records related to the controversial short-term debt sale to the prosecution on April 21. Prosecutors are reportedly scheduled to investigate MBK Partners Chairman Kim Byung-joo, MBK Partners Vice Chairman and Homeplus co-CEO Kim Kwang-il, and Homeplus President and co-CEO Joh Joo-yun as suspects. Detailed information about the investigation process has yet to be announced.
Korea Herald
14-03-2025
- Business
- Korea Herald
Homeplus downplays bankruptcy fears, commits to full debt repayment
South Korean supermarket chain Homeplus has pledged to fully repay its vendors, prioritizing small businesses, while apologizing for heightened concerns over its financial stability following a court's approval of its entry into a corporate rehabilitation program earlier this month. At a press conference on Friday, Homeplus CEO Joh Ju-yeon announced the company had repaid 340 billion Korean won ($234 million) in commercial receivables and assured that most debts to small business owners would soon be settled, though payments to large corporations and franchisees might take longer. "We sincerely apologize for any inconvenience caused to our partners, store owners and investors due to the rehabilitation proceedings," Joh said. "We are doing our best to minimize damage and normalize our operations as soon as possible." "We are making payments to our suppliers and leasehold store owners in sequential order," she remarked. "We ask larger suppliers to be patient, as we will fully honor all bond redemptions according to the installment schedule." Homeplus filed for court-led rehabilitation on March 4, sending shockwaves through the local retail and financial sectors, a measure the company described as a precautionary step to ease its short-term debt burden after a credit downgrade. Homeplus' corporate rehabilitation plan is due for submission by June 3. Despite the turmoil, Joh remained confident in the company's ability to stay afloat, underscoring that the rehabilitation process is accelerating Homeplus' recovery. She noted that Homeplus had around 160 billion won in cash reserves as of Thursday and continues to generate a steady cash flow, ensuring that remaining commercial bond payments can be met. Joh also reassured stakeholders that despite Homeplus' financial distress, its core retail operations remain stable. As of Thursday, compared to normal operations, the company maintained a 95 percent transaction rate across all its platforms, with malls (99.9 percent), logistics (100 percent) and subcontractor operations (100 percent) continuing without disruption. The company further highlighted unexpected gains in sales since entering court-led rehabilitation, noting that revenue in the first week following the filing rose 13.4 percent on-year, while customer traffic increased by 5 percent. Regarding the financial scandal surrounding MBK Partners, the private equity firm behind Homeplus, Vice Chairman Kim Kwang-il denied several allegations. He dismissed claims that MBK played a role in Homeplus' financial decline, stating, 'The sale-and-leaseback strategy is a common business practice, and proceeds from store sales were reinvested into Homeplus operations.' He also noted that Homeplus' store count had declined less than that of E-Mart and Lotte Mart. He also confirmed that the planned sale of Homeplus' supermarket division was put on hold due to the rehabilitation proceedings. 'We are committed to shielding Homeplus from bankruptcy,' Kim reiterated.
Korea Herald
14-03-2025
- Business
- Korea Herald
Homeplus' financial crunch explained in 2 minutes
The Seoul Bankruptcy Court approved South Korea's No. 2 supermarket chain Homeplus' corporate rehabilitation request just 11 hours after filing on March 4. The company called it a preemptive move to manage short-term debt after a credit downgrade. On Feb. 28, Korea Investors Service downgraded Homeplus's credit rating from A3 to A3- due to weak profitability and high debt. After court-approved rehabilitation, it dropped to D on March 4. However, concerns over Homeplus' financial health have deepened, with scrutiny mounting on MBK Partners, the private equity firm behind the struggling retailer. History of ownership changes 1997: Homeplus was founded as part of Samsung C&T's retail division. 1999: Following the Asian financial crisis, Samsung sold a 49 percent stake in Homeplus to British retailer Tesco, forming a joint venture. 2011: Samsung sold its remaining 51 percent stake, making Tesco the sole owner of Homeplus. 2015: Private equity fund MBK Partners, in a consortium with the Canada Pension Plan Investment Board, the Public Sector Pension Investment Board and Temasek, acquired Homeplus for 7.2 trillion won ($4.9 billion). Sales drop-off Since MBK Partners took over, Homeplus has struggled to break past the 8-trillion-won annual revenue mark — a threshold it last exceeded in 2014, a year before the acquisition, with 8.56 trillion won in consolidated sales. Homeplus logged annual sales of 7.93 trillion won in 2016 and 7.94 trillion won in 2017, but its revenue then entered a four-year decline, dropping from 7.65 trillion won in 2018 to 6.48 trillion won in 2021. Despite reverting to an upward trend in sales over the past years — rising to 7.04 trillion won as of January this year — it has remained in the red, posting operating losses for three consecutive years: 133.5 billion won in 2021, 260.2 billion won in 2022 and 199.4 billion won in 2023. In the first three quarters of 2024, Homeplus recorded operating losses of 157.1 billion won. According to the company, its current debt ratio stands at 462 percent, marking an improvement from last year's 1,506 percent. Excluding lease liabilities, Homeplus' financial debt, including borrowing for operating funds, amounts to approximately 2 trillion won. MBK at the center of controversy While Homeplus blamed heavy regulations and e-commerce growth for its downturn, much of the criticism is directed at MBK Partners. Its 7.2 trillion won acquisition, which included Homeplus' existing debt, comprised 3.2 trillion won funds from a blind fund with the remaining funded through acquisition financing loans. The private equity firm has liquidated over 4.1 trillion won in assets, selling off stores and land to repay debt. Since the acquisition, over 6,000 jobs have been cut, sparking a backlash that MBK prioritized debt repayment and asset liquidation over long-term growth, leading to a sharp decline in revenue and profitability. MBK claims it did not anticipate Homeplus' credit downgrade, continuing to sell commercial paper and short-term bonds to retail investors before the rating drop. What's next Homeplus asserts that its situation is not a case of general insolvency but rather a temporary financial restructuring under court-led rehabilitation. While financial debt repayments are deferred, the company continues to operate as usual, ensuring trade obligations are met while securing agreements with key suppliers for continued product deliveries. It has reassured suppliers and partners that payments will be made in phases, prioritizing small business owners and small and medium enterprises, while large corporations will receive payments in installments. The company also highlighted its real estate holdings, estimated at over 4.6 trillion won, as a potential financial cushion.
Korea Herald
05-03-2025
- Business
- Korea Herald
Banking sector sees minimal impact from Homeplus' debt restructuring
Homeplus' W2tr debt is manageable, no systemic risk: analysts As South Korea's retail industry grapples with the shock of its second-largest supermarket chain entering court rehabilitation, market watchers largely believe that Homeplus' debt isn't substantial enough to trigger a sector-wide crisis or destabilize the local financial industry. Industry reports on Wednesday show that Homeplus holds around 2 trillion won ($1.37 billion) in debt from local financial institutions, with Meritz Financial Group being the largest creditor at 1.2 trillion won, followed by Hanwha Securities & Investment at 150 billion won and the banking sector at a combined 110 billion won. Homeplus' exposure came into focus as it began court-led rehabilitation on Tuesday, a preemptive move to address a potential funding crunch following a recent credit rating downgrade. The court immediately approved and initiated the procedure. The largest single creditor is Meritz Financial Group, which holds approximately 1.2 trillion won in mortgage loans extended to Homeplus by three of its subsidiaries, secured through beneficiary certificates from a trust contract between Homeplus and a real estate trust company. Despite the substantial amount, Meritz remains confident in Homeplus' ability to recover. "The collateral value is estimated at around 5 trillion won, and we anticipate no issues in recovering the funds," a Meritz official said, adding that the exercise of its senior beneficiary rights is unrelated to the rehabilitation process. Entrusted assets are regarded as the trustee's property and, therefore, are not subject to the debtor's rehabilitation process. Korea Investors Service, the Korean arm of global credit ratings agency Moody's, also assessed that Homeplus' rehabilitation process "will have limited impact" on Meritz, noting that the real estate collateral shows a relatively "good" loan-to-value ratio. The banking industry's exposure to Homeplus, totaling 110 billion won — comprised of 55 billion won from KB Kookmin Bank, 28 billion won from Shinhan Bank, and 27 billion won from Woori Bank, all in short-term loans — is expected to have a limited impact from the retailer's credit event. 'These three banks' total combined loans amount to about 983 trillion won, with their loans to Homeplus accounting for just 0.01 percent of the total,' said Kim Jae-woo, a researcher at Samsung Securities, adding that even with the retailer's loan provisioned, the impact on lenders' quarterly earnings would be minimal, around 1-2 percent. While concerns grow that Homeplus' credit issue could trigger an industrywide crisis, similar to Tmon and WeMakePrice's liquidity crunch last year, market watchers see this as unlikely. 'The short-term impact on the retail industry is expected to be limited,' said NH Investment & Securities analyst Joo Young-hoon. 'Homeplus stated it will continue normal operations across all retail channels regardless of the corporate rehabilitation process, meaning there will be no change in the industry's competitive landscape.' Homeplus said it initiated rehabilitation preemptively, unlike Tmon and WeMakePrice, which were already struggling with capital erosion when it applied for corporate rehabilitation. The Seoul Bankruptcy Court also acknowledged this when it approved the rehabilitation process on Tuesday, opting not to appoint a trustee, citing Homeplus' scale and transaction volume. Industy rivals such as E-Mart may even benefit from the situation, analysts anticipated, as Homeplus is expected to see further declines in operating revenue and market share as it goes through the debt restructuring process. Homeplus is set to submit its rehabilitation plan by June 3. Meanwhile, Korea Ratings downgraded Homeplus' credit rating from A3- to D on Wednesday, following its filing for corporate rehabilitation. This comes just days after Korea Investors Service downgraded the rating from A3 to A3-.
