Homeplus submits revised rehabilitation plan incorporating store closures and cost-cutting measures [Yonhap News file photo]

Homeplus, the major discount store chain, is now headed toward bankruptcy as it has failed to find a buyer and faces no clear path forward.

On the 3rd, the 4th Rehabilitation Division of the Seoul Bankruptcy Court (Presiding Judge Jung Joon-young) decided to discontinue the corporate rehabilitation proceedings (court receivership) for Homeplus.

This decision comes one year and four months after the rehabilitation proceedings for Homeplus began on March 4 of last year.

The court reached this conclusion after determining that the revised rehabilitation plan submitted by Homeplus on the 30th of last month lacked feasibility.

The court explained, "Although the sale of the Homeplus Express business division was completed, the remaining business units have continued to operate without a successful acquisition or merger. During this process, revenue has declined while public interest claims—such as salaries, payments for goods, and taxes—have surged."

Public interest claims refer to obligations that are paid out prior to general rehabilitation claims or secured claims for companies undergoing rehabilitation proceedings.

The court further stated, "The administrator has not only failed to pay employee salaries for June of this year but has also been unable to properly pay suppliers, leading to difficulties in procuring goods necessary for store operations." The court concluded, "Even though approximately 200 billion won is required to implement the rehabilitation plan, these funds have not been secured to date."

The court added, "Because the rehabilitation plan lacks feasibility, we have discontinued the proceedings without referring it to the deliberation or resolution of a creditors' meeting."

Homeplus and its creditors may file an immediate appeal against this decision within 14 days. As the 17th, the final day of the appeal period, is a public holiday, the actual deadline is the 20th.

Should Homeplus secure the necessary funding and file an immediate appeal within the deadline, there remains a possibility that the court could reverse its decision to discontinue the rehabilitation proceedings. If no appeal is filed, the decision to discontinue becomes final.

If creditors file an immediate appeal, the court may require an "appeal deposit" to mitigate losses incurred by the delay in discontinuing the rehabilitation proceedings.

Citizens walking in front of a Homeplus store in Seoul [Yonhap News file photo]

Corporate rehabilitation is a system where a company experiencing management crises is placed under court supervision to recover if it is determined that its "going-concern value" exceeds its "liquidation value."

Once the discontinuation of rehabilitation proceedings is finalized, the court's comprehensive stay order, which had previously blocked creditors from enforcing claims, attaching assets, or initiating auctions, will also be lifted. Consequently, the only remaining option for the company is effectively bankruptcy.

While it is technically possible to re-apply for rehabilitation proceedings after a discontinuation, such requests are rarely granted unless there is a significant change in circumstances.

If Homeplus files for bankruptcy in the future and the court issues a ruling, a liquidation process to distribute assets to creditors will be scheduled.

At that stage, the court would hold a creditors' meeting to decide whether to continue or cease operations and would conduct an investigation into the claims.

Homeplus filed for rehabilitation on March 4 of last year, and the court approved the start of proceedings that same day.

At the time, the court determined that the liquidation value of Homeplus exceeded its going-concern value and authorized the creation of a "structural innovation rehabilitation plan" involving the sale of all or part of its operations.

Homeplus submitted its structural innovation plan on December 29 of last year, followed by a revised plan on the 30th of last month. These proposals included plans to close unprofitable stores, divest assets, and seek mergers and acquisitions.

Under the Debtor Rehabilitation and Bankruptcy Act, the court could have extended the deadline for the approval of the rehabilitation plan until September, but the court deemed it ineffective and chose to halt the proceedings.