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Homeplus avoided liquidity crisis. Its parent company could lose a much bigger fight.

Published: 05 Mar. 2025, 18:45

SHIN HA-NEE
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Homeplus's logo is shown outside the retailer's branch in western Seoul on March 4. [NEWS1]

As Homeplus “preemptively” enters corporate rehabilitation, its parent company, MBK Partners — Asia’s largest private equity firm — is facing growing skepticism about its management capabilities, which may harm its chances in its ongoing battle with Korea Zinc for its controlling rights.

The court-approved rehabilitation process, granted on Tuesday, aims to prevent a potential liquidity crisis following a recent series of downgrades to Homeplus's credit rating, which the company feared would greatly increase its borrowing costs and lead to a cash crunch.

The restructuring comes a decade after MBK Partners acquired Korea's second-largest supermarket chain for 7.2 trillion won ($5 billion) from British retailer Tesco in 2015, marking what was, at the time, Korea's biggest-ever acquisition.

Excluding Homeplus's liabilities at the time, MBK Partners invested around 5 trillion won in the deal, according to Homeplus. Reports speculated that the firm had funded more than 4 trillion won of the investment with borrowed money, but Homeplus claimed in a statement that just 2.7 trillion had been financed through loans.

The private equity firm has been struggling to sustain its leveraged buyout deal, especially as the rise of e-commerce fuels industrywide slowdown in brick-and-mortar, driving MBK Partners to sell assets and scale down operations as interest piles up.

Despite Homeplus’s assurance that the country’s second-largest supermarket chain will continue its operation as usual, its labor union is blaming MBK Partners for its “irresponsible management.”

“The massive financial expenses incurred during the M&A, including loan interest payments, fell on Homeplus, significantly deteriorating the company’s operation,” argued Homeplus’s labor union in a statement released on Tuesday.

“MBK has, in effect, abandoned Homeplus, only focusing on recouping its investments,” the union said, warning that the rehabilitation would eventually result in mass layoffs and the shutdown of its branches.

However, a spokesperson for MBK Partners stressed that “We cannot restructure the work force, though there may be some adjustments of real estate assets.”

The rehabilitation proceedings temporarily suspended Homeplus's debt obligations, which are worth around 2 trillion won. Meritz Financial Group holds the most exposure, as three Meritz subsidiaries issued loans worth a total of 1.2 trillion won to Homeplus last year.

“All of Homeplus’s real estate assets are collateralized to a trust, to which Mertiz Financial Group holds the first-priority beneficiary’s right,” said the group on Wednesday. “As the collateral within the trust is valued at around 5 trillion won, we believe there will be no issue in recovering the loans.”

Financial Supervisory Service (FSS) Gov. Lee Bok-hyun told reporters on Wednesday that lenders’ exposures to Homeplus remain manageable.

The chief regulator added, “We have commissioned research on issues involving financial capital’s control of industrial capital,” stating that the FSS would review the study’s findings with the Financial Services Commission in the first half of the year.

Korea Zinc Chairman Choi Yun-beom speaks during a press conference held in central Seoul on Nov. 13. [NEWS1]

The latest development could reduce MBK’s chances of winning controlling rights of Korea Zinc, which has been arguing that MBK and its ally, Young Poong, are only after financial gains and have no management expertise in the field. MBK Partners and Young Poong have been involved in a fierce management control feud with Korea Zinc since September of last year.

BY SHIN HA-NEE [[email protected]]