Korean retail giant Homeplus has filed for bankruptcy, citing potential liquidity concerns that could impact vendor payments.
Industry analysts attribute the crisis to a “winner’s curse” following private equity firm MBK Partners’ leveraged buyout in 2015.
The acquisition – valued at approximately $4.98 billion – was primarily debt-financed, with MBK investing around $1.52 billion and borrowing $3.46 billion under Homeplus’s name.
Speaking to Koreabizwire on condition of anonymity, an industry insider suggested the filing was a strategic move rather than an immediate necessity.
“Filing for court protection before any actual default on vendor payments or interest payments suggests MBK is attempting to restructure financial obligations rather than address fundamental business issues,” the source said.
Homeplus has faced ongoing profitability challenges since 2021, reporting consecutive operating losses: approximately $92.1 million in 2021, $179.5 million in 2022, and $137.9 million in 2023.
In fiscal year 2023, its net loss reached about $397.3 million, while the first three quarters of 2024 showed an operating loss of $108.7 million, despite revenues of $3.67 billion.
Like many traditional retailers, Homeplus has struggled with the rise of e-commerce post-pandemic. However, its financial situation is further strained by significant debt obligations.
As of November last year, the company’s net debt stood at approximately $3.68 billion, with a debt ratio of 1408.6 per cent.
A report by the Homeplus branch of the Mart Industry Labor Union found that between 2016 and 2023, Homeplus’s interest payments totalled about $2.14 billion, exceeding its operating profits by $1.73 billion over the same period.
The company currently owes $831.1 million to Meritz companies, $76.2 million in bank credit lines, $173.2 million in commercial paper, and $242.5 million in delayed supplier payments.
Homeplus maintains that its $2.58 billion in real estate assets should support negotiations with financial creditors once a rehabilitation plan is finalised. Meritz Financial Group – a key creditor – asserted that it holds first-priority beneficiary rights to Homeplus’s real estate assets through trust arrangements, a position it claims remains unaffected by the bankruptcy proceedings.
Homeplus stores sell groceries, clothes, and appliances. In 1999, Homeplus formed a joint venture with the British retail chain Tesco called “Samsung Tesco”. Since then, it has grown by acquiring 33 Homever (formerly Carrefour) stores.
