Homeplus reopening unlikely before late July at earliest as hurdles mount

Homeplus has filed an immediate appeal against a court ruling to terminate its corporate rehabilitation proceedings, hoping to revive its restructuring bid through debtor-in-possession financing if the court accepts the challenge. Even so, industry observers say the retailer is unlikely to reopen right away, even if the rehabilitation process is extended.

According to industry sources Tuesday, if the Seoul Bankruptcy Court accepts Homeplus's appeal and extends the rehabilitation proceedings, the earliest the retailer could resume operations would be late this month or early August. The court's reconsideration review and financing execution are expected to take one to two weeks.

Through that reconsideration, the court will examine whether the key reason for terminating the rehabilitation — the failure to secure 200 billion won ($135 million) in external funding — has been resolved, and will determine whether to reverse its earlier ruling. At the same time, the court will proceed with approving execution of a 200 billion won DIP loan authorized by Meritz Financial Group, Homeplus's largest creditor.

The court's decision on rehabilitation is expected to come after the DIP loan is executed. Industry sources believe the process could be completed as early as this week, or by early next week at the latest. If the court approves the resumption and extension of rehabilitation, Homeplus would use the DIP funds to begin negotiations with suppliers toward reopening. The company suspended operations at 67 stores and its online shopping mall on July 13.

The biggest challenge is rebuilding trust with suppliers. Homeplus has failed to pay them for months due to its financial difficulties. A survey conducted last month by the Korea Federation of SMEs of 150 Homeplus suppliers found that unpaid amounts averaged 774 million won per supplier. Four in 10 suppliers had not received more than 500 million won, and two in 10 were owed more than 1 billion won. To reopen its stores, Homeplus will need to pay at least part of the outstanding amounts and restore trading relationships. The company is expected to focus its negotiations first on fresh food and grocery suppliers, whose products it cannot stock on its own.

The online shopping platform faces its own obstacles. Delivery companies that handled Homeplus's logistics left after operations were suspended. "There is a strong possibility that the existing delivery firms and couriers have already found other clients in the meantime," a source familiar with the matter said. "Resuming the online mall will be even harder."

Overdue wages are another problem. Homeplus paid only part of its June payroll, and July wages are also likely to be delayed. The monthly wage bill has fallen to around 30 billion won after a large number of employees resigned last month, according to sources. A Homeplus official said, "For both online and offline operations to resume, negotiations with suppliers and delivery companies must come first," adding that "efforts to resolve outstanding wage payments will also proceed at the same time."

Should Homeplus reopen, credit card companies are also expected to resume payments to the retailer. Most card issuers have withheld payments since Homeplus suspended operations, a precautionary move to account for potential refunds on sales processed before the shutdown. The card companies determined there was a risk they might not recover the funds later and moved preemptively to manage that exposure.

Under the current standard merchant agreement, card companies may withhold payments when a merchant undergoes "a rehabilitation filing, bankruptcy filing, or suspension of transactions by a clearing house, or a comparable material change in business operations under the Debtor Rehabilitation and Bankruptcy Act." Card companies are expected to reconsider the payment freeze if Homeplus's operations return to normal.