The future of Homeplus, South Korea’s second-largest hypermarket chain, hangs in the balance as a deadline approaches for a viable restructuring plan. The company, currently undergoing court-led rehabilitation, faces potential bankruptcy if its major shareholder, MBK Partners, fails to present a convincing path to financial stability. The situation has escalated to the point where Homeplus employees are resorting to desperate measures, including a multi-day protest and a symbolic 100-kilometer march to the presidential office, to draw attention to their plight.
On , eight Homeplus workers began a hunger strike and initiated a traditional “sam-bo-il-bae” – a series of prostrations – towards the presidential office in Seoul. The protest, led by An Su-yong, head of the Homeplus branch of the Korean Federation of Service Workers’ Unions (KFSU), and Kang Woo-cheol, a union committee member, is a last-ditch effort to compel the government to intervene and facilitate a resolution. The symbolic march, covering approximately 1.6 kilometers, took nearly two hours to complete, highlighting the workers’ determination and desperation.
Financial Strain and the Role of MBK Partners
The current crisis stems from a highly leveraged buyout (LBO) orchestrated by MBK Partners in , when the firm acquired Homeplus from Tesco. The acquisition was largely financed through debt taken on by Homeplus itself, placing a significant financial burden on the retailer. Union leaders argue that MBK’s financial strategy, which involved selling off profitable stores and real estate assets to repay acquisition-related debt, has undermined the company’s long-term viability. An Su-yong contends that MBK has not demonstrated sufficient effort towards self-rescue, questioning whether the firm is genuinely committed to saving Homeplus.
The situation is further complicated by delayed payments to suppliers and store operators. As of , retailers operating within Homeplus locations have yet to receive settlements for January sales, exacerbating financial difficulties throughout the supply chain. This delay is attributed to Homeplus’s corporate rehabilitation proceedings and a historically long settlement cycle – already ranging from 30 to 60 days, double that of other major discount chains – deliberately maintained to conserve cash and minimize interest expenses.
Job Security and Potential Fallout
The potential collapse of Homeplus carries significant implications for employment. The KFSU estimates that as many as 100,000 jobs are at risk, encompassing Homeplus’s 20,000 direct employees and a substantial number of subcontracted staff. Concerns over job security have prompted Homeplus to consider store closures and restructuring, although the company maintains that affected workers will be relocated to nearby branches whenever possible. However, employees remain skeptical, fearing mass layoffs.
Beyond direct employees, the bankruptcy of Homeplus would also impact numerous suppliers and partner businesses. The court approved a distribution of 345.7 billion won (approximately $237.9 million) to cover payments to suppliers and store operators from December to February , but the ongoing delays and uncertainty surrounding the future of the company continue to fuel anxieties.
MBK’s Promises and Concerns over Asset Sales
Kim Byung-joo, chairman of MBK Partners, previously pledged to invest 500 billion won of his personal funds into Homeplus during a National Assembly audit. However, reports indicate that the actual amount contributed to date is significantly lower, estimated at around 400 billion won, with the remainder provided as guarantees. This discrepancy has raised questions about the sincerity of MBK’s commitment to rescuing the retailer.
Union leaders are also critical of the proposed restructuring plan, which includes the sale of key retail locations. They argue that selling off profitable assets will deter potential investors and effectively transform the restructuring process into a liquidation. An Su-yong characterized the plan as a “liquidation plan” rather than a genuine attempt at revival.
Government Intervention and Potential Alternatives
The Homeplus workers are urging the government to intervene and facilitate a more constructive dialogue between MBK Partners and stakeholders. They propose that a public asset management corporation, such as the Korea Asset Management Corporation (KAMCO), also known as Yuamco, take over the rehabilitation process to ensure a more equitable outcome. The workers believe that such intervention is crucial to prevent a scenario where MBK Partners profits from the company’s demise while leaving tens of thousands of workers and businesses facing financial ruin.
While the government has historically been hesitant to intervene in private sector restructuring, particularly in non-essential industries, the scale of the potential fallout from a Homeplus bankruptcy may force a reassessment of this approach. The situation remains fluid, and the next few weeks will be critical in determining the fate of Homeplus and the livelihoods of those who depend on it.
