MBK offers additional 100 billion won guarantee for Homeplus, ball in Meritz's court

MBK Partners has agreed to provide an additional 100 billion won ($72 million) joint guarantee covering half of the 200 billion won ($145 million) in emergency debtor-in-possession financing that Homeplus needs, shifting pressure onto its largest creditor, Meritz Financial Group, to reverse its opposition to further lending.

MBK announced the decision Wednesday in a statement, saying it had agreed to provide the additional joint guarantee "to maintain Homeplus's normal business operations and ensure the stable progress of its rehabilitation proceedings."

"Homeplus needs 200 billion won in emergency operating funds to continue normal business activities — including product procurement, payments to suppliers and store operations — and to smoothly pursue mergers and acquisitions of its remaining business units," MBK said. "If the operating fund arrangement is finalized, we plan to provide a joint guarantee as a shareholder for 100 billion won, or half of the total."

MBK added that it had already supported Homeplus's rehabilitation through personal asset contributions, joint guarantees and externally borrowed operating funds. "Including this additional guarantee, the total financial and credit burden we have taken on for Homeplus's rehabilitation will reach 500 billion won," it said.

MBK had previously asked Meritz to provide a short-term bridge loan of 100 billion won and DIP financing of 200 billion won to stabilize Homeplus. Meritz indicated it could consider the request on condition that MBK Chairman Kim Byung-ju provide a personal performance guarantee, but talks broke down after MBK ruled out a personal guarantee from the chairman.

With MBK's latest commitment, the decision now rests with Meritz. The Democratic Party of Korea's Euljiro Committee and the party's Homeplus task force were set to pay a protest visit Thursday morning to Meritz Securities in Yeongdeungpo-gu, Seoul.

Meanwhile, concerns have mounted that Homeplus is effectively heading toward liquidation as additional funding has yet to materialize ahead of the rehabilitation court's July 3 deadline to approve a rehabilitation plan. Homeplus this month finalized the permanent closure of 37 stores that had been temporarily shut nationwide. Some 3,500 employees at those locations have been placed on what amounts to forced leave, receiving only 70 percent of their wages — payments that have themselves been delayed due to the company's financial difficulties.