Seoul: Financially troubled discount store chain Homeplus Co. announced it will close 15 outlets as part of emergency management measures amid a worsening business environment.
According to Yonhap News Agency, Homeplus has been under a court-led rehabilitation program since March, when two local credit rating agencies downgraded its corporate bonds from A3 to A3-, citing poor financial health. The company is required to submit its rehabilitation plan to the Seoul Bankruptcy Court by September 10.
Samil PricewaterhouseCoopers, the court-appointed accounting firm, recommended holding a merger and acquisition (M and A) auction before the court approves the plan, noting the company's liquidation value exceeds its going-concern value. The court accepted this recommendation. Meanwhile, Homeplus' sales have been declining due to weak consumer confidence, reduced transactions with suppliers, and suppliers' demands for advance payments, creating a potential liquidity crisis.
"If the current situation continues, the company's revival through an M and A before court approval of the rehabilitation plan could be at risk," co-CEO Joh Joo-yun stated in a message to employees. Joh added that the company has entered emergency management mode to prevent such a crisis, stressing that the situation goes beyond a management issue to one affecting the wider economy and the job security of 22,000 employees at Homeplus and its subcontractors.
Joh is one of two court-designated managers, along with Kim Kwang-il, vice chairman of MBK Partners. MBK Partners acquired a 100 percent stake in Homeplus in 2015 from British retailer Tesco Plc for 7.2 trillion won (US$5.2 billion). Homeplus operates 125 outlets as of Wednesday.