Homeplus shutdown fears mount as cash crunch worsens amid lack of a buyer

[Financial News] Homeplus, which is undergoing corporate rehabilitation proceedings, could temporarily close all its stores this month amid difficulties in its sale and a severe cash crunch. If the closures become reality, it may be difficult to say when operations could resume, raising concerns that they could effectively lead to a complete shutdown.
According to Financial News’ reporting on the 3rd, concerns are mounting within Homeplus that all its stores may temporarily close this month. The sale is proving difficult, and prolonged weak sales have left even operating funds running low. The union is not ruling out the worst-case scenario: all stores could close temporarily again as early as this month if no new buyer emerges or the company fails to secure additional operating funds. 
An Su-yong, head of the Homeplus branch of the Mart Workers’ Union, said, “People on the ground at Homeplus are struggling through each day in a swamp of despair.” He added, “Nearly half of all employees are on furlough, and with wages repeatedly going unpaid, they are unable to receive even their regular pay and are worried about making ends meet. They are so deep in debt from using one credit card to pay another and behind on health insurance premiums that they cannot even get loans.”
Homeplus began efforts to normalize its operations after a court approved its rehabilitation plan in September, but sales remain far below target. It posted sales of 116.4 billion won over the 18 days following the resumption of operations in August, showing early signs of recovery. But the boost from reopening faded, and the recovery stalled after it was unable to sell gift sets even during the Chuseok shopping season. Sales, which stood at around 40% of target in mid-September, reportedly fell to around 30% by early last month.
The prolonged slump in sales is also deepening the cash crunch. Industry sources believe that even the 200 billion won in emergency operating funds (DIP) injected in July to help normalize Homeplus’ operations has already been exhausted.
An industry source said, “The company is facing substantial fixed-cost burdens, including employee wages, maintenance fees and electricity bills.” The source added, “200 billion won is nowhere near enough even to secure goods for sale in its stores, so it should be considered already depleted.”
The cash crunch has led to the cancellation of voluntary retirement plans and continued wage arrears. On the 29th of last month, just two days before the scheduled date for voluntary retirement, Homeplus announced that it was canceling the process, citing “a change in management circumstances.” This is seen as a sign that the company judged it would be difficult to cover the related costs, given that it had originally planned to pay outstanding wages, Chuseok bonuses and severance pay all at once on the 14th of this month. Payment of the remaining 75% of August wages, scheduled for the 30th of last month, was also postponed indefinitely. Homeplus had said on the 23rd of last month that it would first pay 25% of August wages and pay the remaining 75% on the 30th, but it postponed payment again a day before it was due as its financial situation failed to improve. No specific payment date has been set so far.
Even the merger-and-acquisition (M&A) process, seen as virtually the last chance for a turnaround, is running into difficulties. Homeplus had planned to receive letters of intent (LOIs) by the end of last month but has yet to find a clear acquisition candidate. Its sale adviser, Samil PricewaterhouseCoopers, has extended the deadline for submitting LOIs and is continuing the sale process by accepting acquisition proposals without setting a separate closing date.
The Joint Committee for the Resolution of the Homeplus Crisis and others are calling for the government to intervene actively, warning that Homeplus may be unable to recover if the lack of a buyer and the cash crunch persist. At a press conference that day, the committee stressed, “Homeplus is in such a desperate situation that it cannot afford to spend time simply waiting for a prospective buyer to appear.” It added, “The government must step in to protect jobs and the livelihoods of partner companies, while preventing the collapse of the local economy.”
[email protected] Jang Yu-ha Reporter