Homeplus Co, a discount store chain experiencing financial troubles, disclosed on Wednesday its plans to shut down 15 outlets due to increasing operational challenges in the business environment.
Undergoing a court-led rehabilitation process since March this year, Homeplus has been grappling with its dipping financial health. The company’s corporate bonds value was adjusted from A3 to A3- by two local credit rating agencies, given its unsatisfactory financial state. The organization is expected to present its rehabilitation strategy to the Seoul Bankruptcy Court by the 10th of September.
Samil PricewaterhouseCoopers, the court-assigned accounting firm, suggested conducting a merger and acquisition (M&A) auction before the court endorses the plan, as the liquidation value of Homeplus surpasses its ongoing concern value. The court has given its consent to this recommendation.
In recent times, the company has witnessed a slump in sales due to plummeting consumer confidence, decreased transactions with suppliers and the latter’s insistence for upfront payments, thereby instigating a prospective liquidity crisis.
Joh Joo-yun, the co-CEO, expressed his concerns in a message to the employees stating that if this situation prolongs, the company’s revival through an M&A prior to the court’s approval of the rehabilitation plan might be jeopardized.
Joh further emphasized that the company has resorted to emergency management actions to avert the crisis. He highlighted that the issue transcends beyond a mere management problem to one that impacts the broader economy and the job security of 22,000 workers employed with Homeplus and its subcontractors.
Joh, along with Kim Kwang-il, the vice-chairman of MBK Partners, are the two court-appointed managers. MBK Partners took over a 100 percent stake in Homeplus from the British retailer Tesco Plc in 2015, amounting to 7.2 trillion won (US$5.2 billion).
As of Wednesday, Homeplus operates 125 outlets.
What is the financial state of Homeplus Co?
The discount store chain is currently under a court-led rehabilitation program due to its poor financial health.
What was the recommendation of Samil PricewaterhouseCoopers regarding the company’s current situation?
The court-appointed accounting firm suggested a merger and acquisition auction before the court approves the rehabilitation plan, as the company’s liquidation value is higher than its going concern value.
What is the impact of Homeplus’ financial troubles on its employees?
The co-CEO, Joh Joo-yun, expressed concerns that the ongoing situation could affect the broader economy and the job security of 22,000 workers at Homeplus and its subcontractors.
