Homeplus Rehabilitation Plan Approved: Why It’s Too Early to Celebrate

A news alert popped up on my phone this afternoon: “Homeplus rehabilitation plan approved by the court.” My first thought was simple: Oh, thank goodness, it’s finally over. Having heard the news about the start of rehabilitation proceedings last March, followed by reports of entire stores closing over the summer, that reaction felt natural. However, after opening a few more articles, the tone was different. Phrases like “the bankruptcy crisis has been averted, but…” and “challenges remain” were attached like footnotes. Curious why everyone was so cautious despite the approval, I dug a little deeper.

Homeplus Rehabilitation Plan Approved: What Happened Today?

On September 2nd at 3:00 PM, the Homeplus creditors’ meeting was held at the 4th Rehabilitation Division of the Seoul Rehabilitation Court (Presiding Judge Jung Joon-young). Immediately after the vote, the court announced that the rehabilitation plan had been passed with 100% approval from the secured creditors’ group, 75.90% from the general creditors’ group, and 100% from the shareholders’ group, and promptly issued an approval decision. It took about a year and six months since the start of the rehabilitation process in March of last year to reach this point.

While the numbers might look like overwhelming support, the 75.9% figure from the general creditors’ group tells a different story. Out of approximately 2.4816 trillion won in total voting rights, about 1.8836 trillion won voted in favor. This means the result barely exceeded the legal requirement for approval (at least two-thirds of voting rights). It also means that nearly 600 billion won worth of creditors voted against it. Some creditors reportedly expressed concerns about the feasibility of the rehabilitation plan itself.

Kim Kwang-il, Vice Chairman of MBK Partners, who attended as the administrator, expressed deep apologies to the affected creditors and explained that the core of this plan is to streamline the business by focusing on profitable stores and selling off certain locations to secure funds for debt repayment.

It is also worth noting the legal requirements for this vote. For a rehabilitation plan to pass, it must receive approval from at least 4/5 of secured creditors, 2/3 of general creditors, and a majority of shareholders. While the secured creditors and shareholders cleared the bar easily with 100%, the general creditors’ group was at 75.9%, just over 10 percentage points above the 2/3 (approximately 66.7%) threshold. Had even one group failed to meet the criteria, the approval itself could have been derailed today, making it a close call that shouldn’t be overlooked just by looking at the numbers.

What ‘Approval’ Actually Means

This is where it gets confusing. If you only read the news headlines, it sounds like “Approval = Rehabilitation Complete,” but that’s not the case. It only means the court has permitted the company to execute the debt repayment according to the plan; the rehabilitation process only enters its final stages once the actual repayment begins. In short, what happened today is that “a plan to do the homework has been approved,” not that the homework has been finished.

There are still several years of actual debt repayment ahead, and if the plan goes off track, the court could declare bankruptcy again. This company has been to that edge before—last summer, the rehabilitation process effectively stalled due to conflicts over procuring DIP (Debtor-in-Possession) financing, and there was even a decision to terminate the rehabilitation process that was later overturned. It’s easy to see why the news of “approval” doesn’t immediately put everyone at ease.

Why Did It Come to This? — The Sale-and-Leaseback Structure

What I was most curious about, beyond the voting results, was how a major supermarket chain with 6 trillion won in annual revenue ended up in court receivership. The answer consistently points to one term: “sale-and-leaseback.”

In 2015, MBK Partners acquired Homeplus from the British retailer Tesco for about 7 trillion won. Over the next decade, the repeated strategy was to sell the store properties and then lease them back to continue operations. While the stores look the same on the surface, the company’s financial structure changes completely. A company that once did business in its own building becomes a tenant of the building it sold. Naturally, a new monthly rent expense is created.

Looking at the numbers makes the impact clearer. As operations continued under the sale-and-leaseback model, the rent burden grew, and in 2023 alone, cash outflows related to lease liabilities reached 451.6 billion won. Korea Investors Service assessed that while Homeplus’s EBITDA dropped by more than half from 735.1 billion won in 2019 to 321.4 billion won in 2023, its cash-generating capacity was severely insufficient to cover the annual 600 billion won in rent and interest expenses. The money coming in was halved, while fixed costs remained the same or even increased.

Recently, heavier questions have followed. What is the reason Homeplus ended up in rehabilitation even after liquidating about 4 trillion won in assets, and did they sell bonds to investors knowing the possibility of rehabilitation? These have become the core of the controversy. There have been reports that the Financial Supervisory Service questioned their explanation of repayment capacity and that the prosecution raided the headquarters—though this part is still under investigation, so it’s too early to draw conclusions.

Sale-and-Leaseback: It’s Not Just a Korean Story

Looking at this pattern, I was reminded of news from the U.S. a few years ago: the Toys ‘R’ Us case. In 2005, KKR, Bain Capital, and Vornado Realty Trust acquired Toys ‘R’ Us in a $6.6 billion leveraged buyout, a structure where the company itself took on most of the acquisition debt. The buyers took out loans, but the acquired company was responsible for paying them back—different wording, but the principle is not much different from a sale-and-leaseback. It’s a structure where the cash the company earns is diverted first to paying off interest rather than investment, inventory, or store renovations.

Ultimately, Toys ‘R’ Us filed for bankruptcy in 2017 and liquidated all its U.S. stores the following year, leaving 33,000 people unemployed. Reports surfaced that in the meantime, the private equity firms involved had already recouped tens of billions of won in advisory and management fees. Sears followed a similar trajectory. Of course, one cannot simply equate the Homeplus case with these—the acquisition structures, regulatory environments, and current outcomes are all different. However, the broad framework of “acquiring with debt, liquidating assets to recover funds, and leaving the company with the burden of rent” is a pattern that repeats across borders.

One difference is that Homeplus is directly refuting this framing. MBK Partners has stated several times that since the start of the rehabilitation process, they have written off their existing 2.5 trillion won investment entirely and have not recovered a single won. They also explained that the rehabilitation process itself is led by a court-appointed administrator, not a structure where the major shareholder makes decisions independently. Given reports that Chairman Kim Byung-ju and Vice Chairman Kim Kwang-il even offered their homes as collateral to secure DIP financing, at least in this phase of putting out the fire, the major shareholders have put their own money on the line. However, since this explanation doesn’t answer the question of “how much was already recouped through 10 years of sale-and-leaseback,” the debate remains ongoing.

Approval Granted, But What Homework Remains?

What stands out most is the issue of public interest claims. There is a 500 billion won debt, including unpaid amounts to suppliers, that must be repaid. Public interest claims are not subject to the rehabilitation plan vote but must be paid in priority to general rehabilitation claims. If public interest creditors who did not agree to installment payments demand immediate repayment, Homeplus’s liquidity burden could spike again. The agreement rate for installment payments for public interest claims was around 66%, and the court deemed this sufficient to meet approval requirements. In other words, the remaining 34% have yet to be persuaded.

Second is the task of reviving the business itself. Homeplus announced plans to sell 19 of its own stores and pursue M&A to secure funds for debt repayment. Notably, the company had previously closed its headquarters and 67 large supermarket stores nationwide for a temporary shutdown starting July 13th, only to reopen them a month later on August 13th. Whether customers who left during the store closures will return is a separate matter.

The Homeplus General Labor Union has urged the company to quickly prove practical and sustainable business revitalization plans, such as the ‘Trader Joe’s’ model, while emphasizing that job security and the return of furloughed workers are urgent. Whether it’s creditors or workers, they are watching with more anxiety to see if the plan is actually ‘implemented’ rather than the fact that it was ‘approved’.

Third is a problem hidden more in the background: the controversy over criminal liability surrounding MBK Partners Chairman Kim Byung-ju and the ongoing prosecution investigation. Regardless of which direction the results go, there is room for it to affect the implementation of the Homeplus rehabilitation plan in one way or another.

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If you look only at the headlines, it sounds like a story that ends with “the hurdle has been cleared,” but the more I look into it, the more I feel that today is more of a comma than a period. With debt repayment spanning several years, 34% of public interest claims still non-consenting, and the dual challenges of store sales and business normalization, I honestly don’t know at this point whether this will be remembered as a story of how “Homeplus survived” or as another case that started with a sale-and-leaseback and eventually ended in a quiet liquidation.