Homeplus faces store closures, job losses after court scraps rehabilitation

A court on Friday terminated Homeplus's corporate rehabilitation proceedings, dealing a severe blow to the struggling retailer's 67 stores and more than 11,000 employees. The Seoul Bankruptcy Court cited the company's failure to secure 200 billion won ($129 million) in outside financing and the low feasibility of a revised rehabilitation plan the company had submitted.

The court said it had decided "to terminate the rehabilitation proceedings without referring the rehabilitation plan — including the revised version — to a creditors' meeting for deliberation and vote, as the plan has no prospect of being carried out."

The court said that while the sale of the Homeplus Express business unit had been completed, sales continued to fall as the remaining business operated without a merger or acquisition deal, while public-interest claims — including payroll, trade payables and taxes — were mounting rapidly. "A minimum of 200 billion won in operating funds is needed to run the business and execute the rehabilitation plan, yet that amount has not been secured to date," it added.

The ruling overturned expectations that the deadline for approving Homeplus's rehabilitation plan would be extended by up to two months. After Homeplus recently submitted a revised rehabilitation plan, observers had anticipated an extension through September. A creditors' committee, the company's union and shareholders had also filed petitions asking the court to extend the deadline through June 30.

The decision appears to reflect a judgment that a further extension would be pointless given the rapid deterioration of Homeplus's finances. The approval deadline had already been pushed back twice — first from March 4 to May 4, then again to Friday. Under insolvency rules, the deadline runs one year from the date rehabilitation proceedings begin, with a maximum six-month extension permitted when unavoidable circumstances exist.

Homeplus has 14 days to file an immediate appeal against the ruling. If the company secures financing and files the appeal within that window, the court could reverse its termination decision. If no appeal is filed, the termination becomes final.

The termination is expected to disrupt Homeplus's remaining operations and workforce. Once rehabilitation proceedings are formally ended, creditors will take the lead in initiating liquidation procedures that had been on hold. Particular concern centers on unpaid wages and severance payments owed to the roughly 11,000 employees still on the payroll.

The first case of delayed severance payments to departing employees emerged on Wednesday, when Homeplus headquarters notified staff that a cash shortage had made it impossible to pay out severance and company-side retirement benefits scheduled for that day. The notice, issued in mid-June, added: "We sincerely apologize for the inconvenience and concern caused by the delay in severance payments."

Some observers warn that concerns over severance payments could deepen, given that a significant portion of Homeplus's assets held as collateral has been placed in creditors' names through title-trust arrangements. There are also growing fears that if Homeplus stores close, the damage will fall hardest on local commercial districts, particularly in regional areas.