Homeplus enters court-led rehabilitation amid credit crunch

Homeplus Co., a discount store chain in South Korea, said Tuesday it has entered a court-led rehabilitation process after its credit rating declined amid liquidity worries.

The Seoul Bankruptcy Court approved the rehabilitation proceedings for Homeplus after reviewing its application submitted earlier in the day for the procedure.

On Friday, Korea Investors Service and Korea Ratings Inc. lowered the rating of Homplus’ corporate bonds to A3- from A3, citing the lack of the company’s efforts to improve its financial health.

“We have decided to file for the rehabilitation program as there existed a possibility of a short-term liquidity crisis. This move is part of our preemptive efforts to avoid a liquidity crisis,” a Homeplus official said.

The official argued the company’s improved debt-to-equity ratio and increased sales on online and offline stores were not reflected in the credit rating evaluation.

The court’s approval for the rehabilitation process shows Homeplus’ fundamentals, including its business value and competitiveness, remain unscathed, he said.

The current management will continue to handle key decisions as the court didn’t designate a court-appointed manager for the company, the company said.

Homeplus currently operates 126 stores nationwide, down from 131 a year earlier.

Its outlets are in normal operation across the country despite its filing for the rehabilitation program.

In the fiscal year that ended in February 2024, the company’s operating losses narrowed to 199.42 billion won (US$137 million) from 260.18 billion won a year ago.

Homplus has reported continued operating losses due to the lack of competitiveness compared with its bigger rivals, such as Emart Inc., the country’s largest discount store chain.

In 2015, private equity fund MBK Partners acquired an entire 100 percent stake in Homeplus for 7.2 trillion won, including 4.3 trillion won in loans, from British retailer Tesco Plc.

Out of the 4.3 trillion-won loan, the company said it has paid back about 4 trillion won.