Korea’s Homeplus to shut 15 stores under emergency management

Financially troubled discount store chain Homeplus Co said Wednesday it will close 15 outlets as part of emergency management measures amid a worsening business environment.

Homeplus has been under a court-led rehabilitation program since March, when two local credit rating agencies downgraded its corporate bonds from A3 to A3-, citing poor financial health. The company is required to submit its rehabilitation plan to the Seoul Bankruptcy Court by September 10.

Samil PricewaterhouseCoopers, the court-appointed accounting firm, recommended holding a merger and acquisition (M&A) auction before the court approves the plan, noting the company’s liquidation value exceeds its going-concern value. The court accepted the recommendation.

In the meantime, Homeplus’ sales have been declining due to weak consumer confidence, reduced transactions with suppliers and suppliers’ demands for advance payments, creating a potential liquidity crisis.

“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.

Joh added that the company has entered emergency management mode to prevent such a crisis, stressing that the situation goes beyond a management issue to one affecting the wider economy and the job security of 22,000 employees at Homeplus and its subcontractors.

Joh is one of two court-designated managers, along with Kim Kwang-il, vice chairman of MBK Partners. MBK Partners acquired a 100 percent stake in Homeplus in 2015 from British retailer Tesco Plc for 7.2 trillion won (US$5.2 billion).

Homeplus operates 125 outlets as of Wednesday.

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