Seoul: Homeplus Co., a discount store chain in South Korea, announced that it has filed for corporate rehabilitation with a Seoul court following a decline in its credit rating due to liquidity concerns. The company sought the court-led rehabilitation program at the Seoul Bankruptcy Court after its credit rating dropped last week.
According to Yonhap News Agency, Korea Investors Service and Korea Ratings Inc. downgraded Homeplus' corporate bonds to A3- from A3 on Friday, pointing to insufficient efforts to enhance its financial stability. A Homeplus official explained that the decision to pursue the rehabilitation program was made to prevent a potential short-term liquidity crisis, describing it as a proactive measure.
The Homeplus representative noted that improvements in the company's debt-to-equity ratio and the increase in sales across their online and offline platforms were not taken into account during the recent credit evaluation. Currently, the company operates 126 stores nationwide, a slight decrease from 131 locations the previous year, with all outlets continuing normal operations despite the rehabilitation filing.
In the fiscal year ending February 2024, Homeplus saw its operating losses reduce to 199.42 billion won (approximately US$137 million) from 260.18 billion won the prior year. The company has consistently faced operating losses due to challenges in competing with larger rivals like Emart Inc., South Korea's leading discount store chain.
In 2015, MBK Partners, a private equity fund, acquired Homeplus entirely from British retailer Tesco Plc for 7.2 trillion won, which included 4.3 trillion won in loans. Homeplus has since repaid about 4 trillion won of that loan.