The investigation report that will determine the fate of Homeplus is due in two days. If the report shows that the going-concern value of Homeplus is lower than its liquidation value, the rehabilitation process could be halted. To enhance Homeplus’s going-concern value, MBK Partners is in final negotiations with store landlords over rent adjustments.
According to the investment banking (IB) industry on the 20th, Samil PwC, appointed as the investigator for Homeplus, must submit its investigation report to the Seoul Rehabilitation Court by the 22nd. The report will include a comprehensive analysis of the company’s financial situation and business plan, focusing on estimating the company’s going-concern value and liquidation value.
The going-concern value refers to the economic value generated if a company’s operations continue. It is typically assessed based on a business plan covering the next ten years. In contrast, the liquidation value refers to the value obtained by halting the company operations and liquidating its assets, such as real estate.
If Samil PwC’s report indicates that Homeplus’s liquidation value surpasses its going-concern value, this would be disastrous for MBK and its employees. It would mean it is more advantageous to close down operations and sell assets to recoup debts. In this scenario, Homeplus’s assets would be liquidated to distribute to creditors.
MBK’s focus on negotiating rent adjustments with store landlords aims to raise Homeplus’s going-concern value. Reducing rent will lower operating costs, thereby increasing this value. Recently, Homeplus negotiated rent adjustments with landlords of 61 stores and notified lease terminations to 17 landlords. The decision was based on the judgment that closing these stores would be more beneficial for increasing the going-concern value if rent adjustments were not feasible based on sales.
The negotiations with the landlords notified of lease terminations are not completely finalized. MBK’s tactic is to lead the landlords to lower rents by negotiating on the brink of closing stores, which would otherwise affect the landlords negatively by reducing their property values and complicating sales. Even though Homeplus is the tenant, MBK is perceived to have an upper hand in negotiations.
To counter the preparation of Samil PwC’s investigation report, MBK is consulting with Samjung Accounting Corporation. This involves significant involvement from Kim Jin-won, a deputy director who frequently collaborated with MBK, and numerous recovery experts from Samjung. The confrontation over assessing Homeplus’s going-concern value and liquidation value between the nation’s top two accounting firms is another key viewing point.