Homeplus weighs further store closures as restructuring deadline looms

Homeplus, which is undergoing court receivership, is weighing additional permanent store closures as it struggles to resolve a deepening financial crisis — with the deadline for creditors to approve its rehabilitation plan now just one month away on July 3.

According to industry sources, Homeplus held a creditors' committee briefing on May 29 and submitted a revised rehabilitation plan. The revised plan is understood to include large-scale restructuring measures, among them the permanent closure of 37 stores that have been temporarily suspended since May 10. The Mart Workers' Union's Homeplus chapter said in a press release Monday that the revised plan also calls for the suspension of roughly 10 additional stores.

Employees inside Homeplus have long voiced concern about further suspensions as the company worked on the revised plan, after the abrupt announcement last month that 37 of its 104 stores would halt operations. At the time, Homeplus said it would pay suspended-store workers a furlough allowance equivalent to 70 percent of their average wages and reassign those who wished to transfer to other stores. The transfer promise, however, was not kept.

The revised plan aims to improve profitability ahead of selling off remaining business units. Homeplus has put its headquarters and online and hypermarket divisions on the market for mergers and acquisitions, in addition to its supermarket unit — Homeplus Express — which it has already agreed to sell to NS Home Shopping, an affiliate of Harim Group. Samil PricewaterhouseCoopers is serving as the sale manager and has sent official teasers to potential buyers, including major domestic retail conglomerates.

Whether the sale process will go smoothly remains uncertain. Some observers say the reduced acquisition price — a result of the Homeplus Express sale and the restructuring — improves the odds of a deal. But the gloomy outlook for offline retail and the deepening labor-management conflict that has accompanied the restructuring are seen as significant obstacles.

Another key question is whether Meritz Financial Group, which reviewed the revised plan, will extend a bridge loan of 100 billion won (about $66.2 million) to Homeplus. The company has struggled to pay employee salaries on time since last December. Workers received only 25 percent of their April wages and have yet to receive their May pay. Some 3,000 employees have left the company between January and April this year.

Meritz, Homeplus's largest creditor, earlier said it would consider the bridge loan request only conditionally — requiring a personal guarantee from Kim Byung-ju, chairman of Homeplus's majority shareholder MBK Partners — a condition Homeplus rejected. Some analysts believe Meritz remains unlikely to provide further support given the uncertainty surrounding the sale of the remaining business units.

Meanwhile, the union is pushing back hard against the restructuring. The Mart Workers' Union's Homeplus chapter, now more than 20 days into a hunger strike, held a press conference at Gwanghwamun Square in Jongno-gu, Seoul, on Monday, urging the government to draw up a plan to normalize Homeplus's operations and to punish MBK Partners. "We will escalate our fight until the government and the ruling party take meaningful action," the union said. "If they will only pretend to move when people collapse, we are willing to show them exactly that."