Hello, this is Kim Kwang-sik, an attorney at Cheongchul Law Firm.

Homeplus, acquired by MBK Partners in 2015, filed for corporate rehabilitation with the Seoul Bankruptcy Court in March 2025 and has been in rehabilitation proceedings for more than a year. On July 3, 2026, however, the Seoul Bankruptcy Court found that Homeplus's rehabilitation plan lacked feasibility and issued a decision discontinuing the rehabilitation proceedings. From July 13, hypermarket stores nationwide went into temporary closure, and the company appeared to be heading toward liquidation.

Then, on July 16, just ahead of the deadline for an immediate appeal, the three Meritz Financial Group companies (Meritz Fire & Marine Insurance, Meritz Securities, and Meritz Capital) — the largest creditors — held board meetings and gave final approval to providing 200 billion won in emergency operating funds (DIP financing). MBK Partners and Chairman Michael ByungJu Kim agreed to provide joint and several guarantees for the entire loan, reviving the prospect of resuming the rehabilitation proceedings. Homeplus plans to file an immediate appeal against the discontinuation decision with the Seoul Bankruptcy Court on July 20.

Today, focusing on this case, we will review the meaning of "discontinuation" of rehabilitation proceedings and the immediate appeal, the legal structure of DIP financing and Meritz's additional 200 billion won support, the repayment priority and recovery prospects for rehabilitation claims, public-interest claims, and short-term electronic bond (jeondanchae) investors, and the possibility of pursuing liability against the private equity sponsor as controlling shareholder.

[Question] Homeplus's rehabilitation proceedings were discontinued, so what does it mean for Meritz to provide an additional 200 billion won, and what position does that leave rehabilitation creditors, short-term electronic bond investors, and supplier companies in?

[Answer]

1. "Discontinuation" of rehabilitation and the immediate appeal — discontinuation is not immediate bankruptcy

Discontinuation of rehabilitation proceedings is a court decision to halt the proceedings, either before or after confirmation of the rehabilitation plan, on the ground that the proceedings can no longer continue. The Homeplus case is a discontinuation at the stage before confirmation of the plan. The Debtor Rehabilitation and Bankruptcy Act (채무자회생법) provides that where a rehabilitation plan submitted within the period set (or extended) by the court is not fit to be submitted for examination and resolution at a meeting of interested parties, the court shall discontinue the rehabilitation proceedings ex officio.

The Seoul Bankruptcy Court cited as grounds for discontinuation that, although the sale of the Homeplus Express division was completed, no M&A was achieved for the remaining divisions; while operations continued, revenue declined, whereas public-interest claims such as wages, payments for goods, and taxes surged, and even the minimum operating funds needed to carry out the rehabilitation plan could not be raised.

However, a discontinuation decision may be challenged by an immediate appeal within 14 days from the date of public notice, and it becomes final only once that period passes or the appeal is dismissed. In particular, because the court's decision here was based on "lack of feasibility due to insufficient operating funds," the court also indicated that if Homeplus raises funds within the immediate appeal period and then files the appeal, just cause may be recognized, in which case the Seoul Bankruptcy Court may itself revoke (correct) the discontinuation decision and set a date for a meeting of interested parties. In short, "discontinuation decision = immediate bankruptcy" does not hold; the possibility of continuing rehabilitation remains, depending on the immediate appeal and on whether funds are secured.

2. The substance of Meritz's additional 200 billion won — DIP financing and the joint guarantee structure

The 200 billion won at issue here is DIP (Debtor-in-Possession) financing — that is, funds provided to normalize operations and secure working capital for a company undergoing rehabilitation proceedings under court supervision. According to reports, this 200 billion won consists of the 100 billion won Meritz had previously deposited in an escrow account plus an additional 100 billion won, with each of the three Meritz companies holding a board meeting to give final approval to the support package.

The key point is the structure for recovering the funds. Unlike existing loans that depend solely on Homeplus's own repayment capacity, this new funding is executed on the condition that MBK Partners and Chairman Michael ByungJu Kim personally provide joint and several guarantees for the entire amount. In other words, if Homeplus fails to repay principal and interest, Meritz can demand payment from MBK and Chairman Kim, so for the additional injection a recovery route separate from Homeplus's assets has been secured. This carries the symbolic meaning that the controlling shareholder is directly bearing the cost of rehabilitation, while also serving the practical function of lowering the credit risk borne by Meritz as creditor.

That said, the three Meritz companies are reported to have also resolved on the same day that "there will be no further financial support for Homeplus." Meritz had also agreed at the end of June to the revised rehabilitation plan submitted by Homeplus, thereby cooperating with the plan confirmation process. The consent of the largest creditor is an important variable that shapes the outcome of the vote on the rehabilitation plan.

3. Repayment priority and recovery prospects for rehabilitation claims, public-interest claims, and short-term electronic bonds

In rehabilitation and bankruptcy situations, a creditor's prospects of recovery vary greatly according to the "nature" of the claim. Under the Debtor Rehabilitation and Bankruptcy Act, claims are broadly classified as follows.

• Public-interest claims (공익채권): claims arising after commencement of rehabilitation proceedings that are necessary to carry out the proceedings, such as wages, payments for goods, and taxes; these are paid preferentially at any time, regardless of the rehabilitation proceedings.

• Rehabilitation security rights (회생담보권): claims secured by security interests, which enjoy priority within the value of the collateral.

• Rehabilitation claims (회생채권): ordinary claims arising from causes predating commencement of the proceedings, which are repaid under the rehabilitation plan through reduction, installment payment, debt-to-equity swaps, and similar methods.

What is particularly at issue in this case are investors in so-called "jeondanchae" (short-term electronic bonds) and in securitized short-term bonds tied to goods purchases. These investors face the risk of loss because their bonds matured after commencement of the rehabilitation proceedings but were not repaid, and the victims' emergency committee claims the damage amounts to approximately 401.9 billion won. The recovery priority of these bonds may differ depending on whether the claim is classified as a rehabilitation claim, whether it may be recognized as having the character of a public-interest claim as a commercial transaction claim, and who the substantive debtor is under the securitization structure. Accordingly, examining the issuance, guarantee, and securitization structure of each individual product in concrete terms is the starting point of any recovery strategy.

The scale of public-interest claims is also a burden. According to reports, public-interest claims grew more than threefold, from approximately 332.8 billion won at the end of March 2025, when rehabilitation was filed, to approximately 1.0999 trillion won at the end of May 2026. Public-interest claims are subject to preferential repayment, but when their scale surges they instead threaten the very feasibility of the rehabilitation plan. This surge in public-interest claims lies behind the discontinuation decision as well.

4. The position of suppliers, tenants, and employees

Payments owed to suppliers for goods delivered after commencement of rehabilitation proceedings are in principle public-interest claims and thus subject to preferential repayment. In practice, however, the DIP funds raised were first exhausted on labor costs and the like, delaying settlement of payments for goods; as a result, deliveries were suspended and operations themselves deteriorated — a vicious circle that has been pointed out. According to reports, payments owed to suppliers have reached a considerable scale, so how the priority of fund disbursement is designed is key to normalizing operations.

For store tenants and in-store businesses, whether lease and occupancy contracts survive, and the nature of the deposit refund claim (whether a rehabilitation claim or a public-interest claim), must be assessed individually according to the timing and content of the contract. Employees' wage and severance claims are granted the highest priority of repayment within certain limits under the Labor Standards Act (근로기준법) and the Act on the Guarantee of Employees' Retirement Benefits (근로자퇴직급여보장법), and are relatively well protected in rehabilitation proceedings as well; but where store closures and restructuring are under way, the actual timing of payment and whether the funding source is secured become practical issues.

5. The possibility of pursuing liability against the controlling shareholder (private equity fund)

One of the sharpest issues in this affair is the question of liability of MBK, the acquiring private equity fund, and Chairman Michael ByungJu Kim. The bondholder victims argue that since the acquisition Homeplus has been operated within a financial structure involving mortgaging of stores, real estate securitization, sale-and-leaseback, and refinancing, and they demand that the controlling shareholder contribute responsible capital directly, beyond a mere joint guarantee. In addition, the timing at which the credit rating downgrade was known, the timing of planning the rehabilitation filing, and suspicions of fraudulent trading in the issuance and sale of short-term electronic bonds have been raised as matters for review by the financial supervisory authorities.

Legally, liability of the controlling shareholder and management may be examined through several routes: damages liability for fraudulent trading and misstatement under the Financial Investment Services and Capital Markets Act (자본시장법); liability of the selling securities firms premised on mis-selling (and the question of those firms' recourse against the controlling shareholder); damages liability toward the company and third parties for breach of directors' duty of care and duty of loyalty; and individual issues within the rehabilitation proceedings such as avoidance powers and unfair support. Each form of liability, however, differs in its requirements, evidentiary structure, and counterparty, so the normative claim that "the controlling shareholder must take responsibility" and the legal question of "what claims are actually available" must be approached separately.

In sum, the Homeplus case shows in real time the shifting phases of insolvency practice, from commencement of rehabilitation to discontinuation, and then to an attempt to continue through an immediate appeal and DIP funding. Meritz's additional 200 billion won may serve as priming water for rehabilitation, but considering the public-interest claims that have already exceeded 1 trillion won, the need to restore suppliers' trust, and the deadline for approving the rehabilitation plan set for early September, the size of the funding alone does not make the success of rehabilitation a foregone conclusion.

The position of each creditor, investor, supplier, and tenant varies greatly according to the nature of the claim, the contract structure, and whether rehabilitation continues or converts to bankruptcy. It is therefore central to any recovery strategy to check individually whether the claim you hold is a public-interest claim or a rehabilitation claim, what the securitization and guarantee structure is if it is a short-term electronic bond, and whether a separate damages claim against the controlling shareholder is possible. If you need concrete measures in connection with the Homeplus situation — debt recovery, losses on short-term electronic bond investments, supplier payments, lease relationships, or pursuing controlling shareholder liability — we recommend requesting a consultation with Cheongchul Law Firm to review the matter systematically, from determining the nature of the claim to responding in rehabilitation and bankruptcy proceedings and devising damages and litigation strategy.