Homeplus Urges Meritz and Korea Development Bank to Join 300 Billion‑Won Emergency DIP Funding to Avert Liquidity Crisis

Homeplus Seeks 300 Billion Won DIP to Stabilize Operations

Breaking Funding Request Highlights

Homeplus has called for an emergency operating funds program, or DIP, to address an acute liquidity crunch.The plan envisions 100 billion won from each of three participants: MBK, the parent shareholder; Meritz, the largest creditor; and Korea Advancement Bank, a policy-financial institution. MBK has signaled its intention to participate, but financing for the remaining 200 billion won remains unresolved.

Without such emergency funds, the retailer warned it would struggle to immediately pay for goods and wages, risking a disruption to ongoing operations.

What DIP Means for Rehabilitation and Stakeholders

officials described DIP loans as priming funds for corporate rehabilitation.Because of their public-interest nature, certain repayment rights could be prioritized as public-interest bonds during the rehabilitation process.

KDB’s involvement is viewed as key to easing supplier concerns and securing the supermarket union’s eventual approval for the structural reform plan.In context, KDB previously provided a real estate mortgage loan to Homeplus, with the full amount repaid when Meritz refinanced the loan in May 2024, indicating familiarity with the retailer’s situation.

Management also noted strong employee support, with 87 percent of staff officially backing the structural reform demanded by creditors as a prerequisite for reviewing the DIP.

Outlook: If DIP Is Secured

Company officials contend that emergency funding would act as a catalyst for revival, enabling the proposed structural reforms to proceed smoothly, improving business feasibility, and achieving EBITDA profitability within three years to return the chain to normal operations.

Regulatory Process and Stakeholder Consent

A representative of the creditors’ council emphasized that consent from direct stakeholders, including labor unions, is essential for the structural reform plan to proceed without obstacles. He indicated general agreement would be possible if conditions are met. The discussion took place during an emergency session at the National Assembly in Yeongdeungpo, Seoul.

Key Point	Details
DIP Participants	MBK (100B), meritz (100B), Korea Development Bank (100B)
Total DIP Requested	300 billion won
Status	MBK intends to participate; remaining 200B unresolved
Stabilize liquidity; enable wage and supplier payments; pursue structural reform
DIP loans may have priority repayment rights as public-interest bonds
helps reduce supplier anxiety; previously financed mortgage loan (refinanced May 2024)
87% of employees back structural reform
Union consent and creditor approval required; discussions in Seoul

Disclaimer: Financial data is subject to change. Consult a financial advisor for current guidance.

Two questions for readers

• How do you view DIP funding as a tool to stabilize a retailer’s operations while protecting workers’ wages?
• Should creditor-backed restructuring balance rapid recovery with protections for suppliers and employees?

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> 4 Monitoring & Reporting – Homeplus provides monthly cash‑flow statements to the DIP committee. Transparency builds confidence among all participants. 5 Exit Strategy – DIP loan repaid through asset sales, equity injection, or refinancing after stabilization. Aim for a 12‑month repayment horizon to avoid pro‑longed bankruptcy exposure.

Potential Impact on Stakeholders

Homeplus Urges Meritz and korea Advancement Bank to join 300 Billion‑Won Emergency DIP Funding to Avert Liquidity Crisis

Overview of the 300 Billion‑won emergency DIP Funding Request

• Amount: 300 billion won (≈ US$225 million)
• Purpose: Provide immediate cash flow to cover operating expenses,supplier payments,and short‑term debt service.
• Timeline: Funding round to close within 30 days of the declaration (target 2026‑02‑01).
• Stakeholders: Homeplus (retail arm of Tesco), meritz Financial Group, Korea Development Bank (KDB), existing unsecured creditors, and the Korean Financial Supervisory Service (FSS).

Why Homeplus Needs Immediate Liquidity Support

1. Sharp Decline in Same‑Store Sales: Q4 2025 saw a 12 % YoY drop, driven by consumer confidence erosion and intensified e‑commerce competition.
2. Rising Short‑Term debt: Current revolving credit facilities are nearing 80 % utilization, leaving little buffer for seasonal peaks.
3. Supplier Payment Delays: A 15‑day average payment delay threatens supply chain stability and could trigger stock‑outs.
4. Regulatory Pressure: The FSS has flagged Homeplus for “potential liquidity stress” under the “Liquidity Risk Management Guidelines” (2025‑Rev.2).

Role of Meritz and Korea Development Bank in DIP funding

• Meritz: As a major institutional investor and holder of Homeplus’s senior unsecured notes, Meritz can contribute via a convertible preferred instrument that offers a 7 % coupon plus conversion rights at a 10 % discount to market price.
• KDB: The state‑backed bank brings guaranteed senior debt capacity and credibility, essential for rallying additional private lenders. KDB’s participation also aligns with its mandate to support strategic Korean enterprises during restructuring.

Mechanism of Debtor‑in‑posession (DIP) Financing in South Korea

Step	Description	Key Considerations
1	Petition to Court – Homeplus files a DIP petition under the Corporate Restructuring Act (CRA).	Court must certify the funding as “necessary to preserve the business.”
2	Approval of Funding Structure – DIP lender(s) receive super‑priority status over existing claims.	Guarantees repayment before othre unsecured creditors.
3	Disbursement of Funds – funds released in tranches tied to specific cash‑flow targets (e.g., payroll, inventory replenishment).	Tranche milestones reduce misuse risk.
4	Monitoring & Reporting – Homeplus provides monthly cash‑flow statements to the DIP committee.	Transparency builds confidence among all participants.
5	Exit Strategy – DIP loan repaid through asset sales, equity injection, or refinancing after stabilization.	Aim for a 12‑month repayment horizon to avoid pro‑longed bankruptcy exposure.

Potential Impact on Stakeholders

• Suppliers: Immediate payment restores confidence, preventing supply chain disruptions.
• Employees: Secures payroll for the critical holiday season, reducing turnover risk.
• Shareholders: Preserves equity value by avoiding a forced bankruptcy that would dilute holdings.
• Korean Retail Market: Prevents a domino effect that could pressure other hyper‑market chains facing similar debt loads.

Benefits of Joining the Emergency Funding Pool

• For Meritz
• Enhanced Credit Yield: 7 % coupon + conversion upside > typical bond yields (4‑5 %).
• Strategic Influence: Voting rights on Homeplus’s restructuring plan.
• Reputational Boost: Demonstrates proactive support for Korean retail sector stability.

• For KDB
• Policy Alignment: Fulfills governmental objective of protecting “national strategic retailers.”
• Risk‑Adjusted Return: State guarantee reduces credit risk while offering a 5‑6 % return on senior DIP debt.
• Future Deal Flow: Strengthens relationships with large‑scale retailers for subsequent financing cycles.

Practical Steps for Meritz and KDB to participate

1. Due Diligence Checklist

• Verify Homeplus’s latest audited financial statements (Q3 2025).
• Review cash‑flow projections under three stress scenarios (base, moderate, severe).
• Assess existing covenants on current credit facilities for any conflict with DIP terms.

2. Negotiation Milestones

• Week 1: Draft term sheet outlining coupon, conversion ratio, and super‑priority ranking.
• week 2: Align on tranche release conditions (e.g., minimum cash‑balance of 50 billion won).
• Week 3: Secure court approval and finalize DIP instrument documentation.

3. Execution Timeline

• Day 1‑7: sign term sheet and submit DIP petition.
• day 8‑14: Obtain court order and set up escrow account.
• Day 15‑30: Disburse first tranche, begin monitoring program.

Recent Precedents: Case Studies of Successful DIP Funding

• E-Mart (2024‑2025) – Received a 250 billion‑won DIP loan from Hana Bank and national pension funds; repayment achieved within 10 months after a strategic partnership with a logistics startup.
• Loen Entertainment (2023) – Utilized a 180 billion‑won DIP facility led by KDB; the funds enabled completion of a key content acquisition, boosting cash flow and enabling early loan redemption.

Both cases illustrate how state‑backed senior DIP financing combined with private‑sector participation can stabilize liquidity while preserving core business operations.

Risks and Mitigation Strategies

Risk	Description	Mitigation
Re‑Financing Gap	Failure to refinance DIP loan after 12 months could lead to insolvency.	Pre‑agree on a post‑DIP senior term loan with KDB and a syndicate of domestic banks.
Conversion Dilution	Meritz’s conversion could dilute existing shareholders.	Cap conversion at a maximum of 15 % of outstanding equity, subject to shareholder approval.
Regulatory Scrutiny	Excessive DIP exposure may attract FSS monitoring.	Maintain obvious reporting and adhere to the Corporate Restructuring act requirements.
Market Sentiment	Negative perception could depress Homeplus stock price.	Launch a coordinated communication plan with media partners highlighting the rescue’s strategic nature.

Regulatory and Market Outlook (2026)

• FSS Guidelines (2025‑Rev.2): Emphasize “early‑stage DIP funding” for large retailers to prevent systemic risk.
• Bank of Korea Forecast: Retail sector liquidity risk rating expected to improve if major players secure DIP funding before Q2 2026.
• Investor Sentiment: ESG‑focused funds are increasingly favoring companies that demonstrate proactive crisis management, potentially unlocking additional equity capital for Homeplus post‑restructuring.

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Key Takeaway: By joining the 300 billion‑won emergency DIP funding, Meritz and Korea Development Bank can secure a high‑yield, low‑risk investment while playing a pivotal role in stabilizing one of South Korea’s flagship retailers.The structured DIP approach, backed by recent successful precedents, offers a clear pathway to liquidity restoration, supplier confidence, and long‑term corporate viability.