This article was displayed on the ChosunBiz MoneyMove site on June 12, 2025, at 4:38 p.m.
Homeplus submitted a survey report prepared over three months to the court, officially starting the corporate rehabilitation process. The report showed that Homeplus's liquidation value is more than 1 trillion won higher than its going concern value.
Homeplus decided to embark on 'M&A prior to the approval of the rehabilitation plan' following the recommendations of an investigation committee. Typically, when the liquidation value is higher than the going concern value, bankruptcy occurs, or, as in the case of Homeplus, M&A prior to the approval of the rehabilitation plan is chosen.
A variable is that Homeplus must obtain the consent of its senior creditor, Meritz Financial Group, to execute this plan. However, industry insiders believe that it would be realistically impossible for Meritz to oppose. Even if Meritz opposes, there is a possibility that the court may compel rehabilitation.
◇ Likely to find a buyer and raise funds before conducting a free capital reduction
According to the investment banking (IB) industry on the 12th, the designated investigator from Homeplus, Samil PwC, held an explanatory meeting on the investigation report and noted to the creditors, "The liquidation value is higher than the going concern value, and we will apply for M&A prior to court approval on the 13th." The meeting was held after Samil PwC submitted the investigation report prepared over three months since March.
According to Samil PwC, Homeplus's liquidation value is approximately 3.7 trillion won, which is 1.2 trillion won higher than its going concern value of 2.5 trillion won. The assets total 6.8 trillion won, while liabilities are 2.9 trillion won, resulting in a net worth of about 3.9 trillion won. Considering residual value, discounted, along with taxes and liquidation costs, this leads to an estimated liquidation value of about 3.7 trillion won.
Liquidation value and going concern value are key factors in determining a corporation's rehabilitation potential. Liquidation value refers to the amount remaining after a corporation sells all its assets, such as stocks and real estate, and pays off its debts. Going concern value is the amount estimated based on the assumption that the company will continue operations, discounted to present value for future cash flows it will generate.
Generally, going concern value must exceed liquidation value for the justification of rehabilitation to stand. However, there are often situations where rehabilitation is pursued despite the liquidation value being higher. This occurs when creditors deem liquidation unlikely or believe the amount they could receive through rehabilitation will exceed what they could recover through liquidation.
Homeplus plans to pursue M&A prior to the approval of the rehabilitation plan. The company aims to first find a new buyer, enter into an investment contract, and use the proceeds from the sale for debt repayment. Subsequently, Homeplus will prepare a rehabilitation plan with the acquirer and report it to the creditors. This means they aim to restructure and sell simultaneously under court protection.
In fact, recently, TMON successfully executed M&A before the approval of the rehabilitation plan, despite its liquidation value (13.6 billion won) being higher than its going concern value (-92.5 billion won). The investigator noted, "Liquidating is more economically viable than continuing business as a going concern," but the company ultimately chose rehabilitation and sold management rights to Oasis with court approval.
If the court grants approval this time, Homeplus will seek external capital through methods such as third-party allocation of paid-in capital after finding a new acquirer. Since this does not involve selling existing shareholders' equity, the investment fund will flow into the company, allowing Homeplus to use it for debt repayment. The existing shareholders are expected to complete the M&A through a free capital reduction.
◇ "Meritz will face pressure from mass unemployment under the new regime"
The biggest obstacle to the approval of Homeplus's rehabilitation plan by the court is Meritz, the senior creditor (rehabilitation secured creditor). Last May, Meritz acted as the sole arranger during Homeplus's acquisition financing refinancing, lending 1.2 trillion won. Within the entire financial group, Meritz Securities has the largest exposure at 655.12 billion won, while both Capital and Fire Insurance bear 280.77 billion won each.
From Meritz's perspective, liquidation is the fastest and surest way to recover investments. The investigator has deemed it justifiable to advocate for liquidation, considering that the liquidation value is over 1 trillion won higher than the going concern value.
If Homeplus enters the rehabilitation process, Meritz may have to wait up to 10 years to recover its funds. According to Article 195 of the 'Debtor Rehabilitation and Bankruptcy Act', it states that when debts are incurred or the deadlines for debts are suspended according to the rehabilitation plan, the deadline for those debts cannot exceed the duration of the collateral if there is collateral, or 10 years if there is no collateral or it is impossible to determine the duration of the collateral.
However, industry insiders believe that it will be realistically difficult for Meritz to oppose Homeplus's rehabilitation plan. If liquidation occurs, stores must be sold and closed, which risks placing the responsibility for mass unemployment on Meritz.
An IB industry source stated, "Particularly in light of the recent change in administration, what will happen if Homeplus cannot continue operations and hundreds of thousands lose their jobs?" They added, "It is not easy for Meritz to shoulder that burden and oppose the rehabilitation plan."
There are also observations that even if the collateral creditor Meritz opposes the rehabilitation plan, the court could make a forced approval decision. Generally, for a rehabilitation plan to be approved in a creditors' meeting, the consent of more than three-quarters of the rehabilitation secured creditors and two-thirds of the rehabilitation creditors is necessary. However, if there is support from the rehabilitation creditors despite the opposition from rehabilitation secured creditors, it can still be approved. In fact, in mid-2024, the court issued a forced approval decision on the rehabilitation plan for Daechang, a medium-sized construction company.
A lawyer who formerly served as a chief judge in a rehabilitation court explained, "A forced approval decision can still be made even if a rehabilitation secured creditor opposes and only some rehabilitation creditors support it," adding that "the forced approval of the rehabilitation plan is a matter of considerable discretion for the court."
Meanwhile, Kim Kwang-il, Vice President of MBK Partners, who is responsible for managing Homeplus, and Cho Joo-yeon, co-representative of Homeplus, plan to present a statement to the court indicating that the going concern value is higher than the liquidation value, contrary to the investigation committee's report.
A senior official from an accounting firm remarked, "It's rare for a rehabilitating corporation to present a different opinion than the investigator, as it emphasizes that the going concern value is higher, likely to secure a more advantageous position during M&A initiatives."