Michael ByungJu Kim, chairman of MBK Partners, South Korea's largest private equity firm, recently used a public forum to extol the virtues of "responsible finance." His timing could hardly have been worse. The collapse of Homeplus — the supermarket chain MBK has owned for a decade — has left thousands of suppliers unpaid, consumers out of pocket, and commercial paper investors nursing losses running into the hundreds of billions of won. The gulf between the chairman's words and the wreckage bearing his firm's fingerprints has sharpened scrutiny from financiers, retailers, creditors, and the public alike.

What went wrong at Homeplus

In March 2025, Homeplus filed for court receivership — the Korean equivalent of chapter 11 bankruptcy protection. The filing came exactly ten years after MBK acquired the chain from Britain's Tesco for approximately 7.2 trillion won (roughly $5.5 billion at the time). The deal was structured as a leveraged buyout (LBO), meaning a substantial portion of the purchase price was financed with debt secured against Homeplus's own assets. Critics argue that a subsequent series of asset sales and sale-and-leaseback transactions steadily eroded the company's financial resilience.

Since the receivership began, around 3,000 Homeplus suppliers have struggled to recover payments for goods already delivered, and some smaller vendors face the risk of cascading insolvency. Consumers have also been caught up in disputes over credit-card payment obligations. According to South Korea's Financial Supervisory Service, losses to investors in Homeplus commercial paper are estimated to run into the hundreds of billions of won.

MBK's defence: blame the market

MBK attributes Homeplus's deterioration primarily to forces beyond its control: the structural decline of bricks-and-mortar retail following the Covid-19 pandemic, and the explosive growth of e-commerce rivals such as Coupang and Naver. The firm insists the travails of Homeplus reflect an industry-wide trend rather than any particular failing of its own stewardship.

There is some truth to this. Emart and Lotte Mart, South Korea's other major hypermarket operators, have both endured stagnant revenues and shrinking margins. Data from the Ministry of Trade, Industry and Energy show that hypermarkets' share of total retail sales fell from 16.6% in 2015 to just above 11% in 2023. MBK leans heavily on these figures to deflect arguments about structural responsibility on the part of management and the controlling shareholder.

The rebuttal: leverage was the real detonator

Experts are unconvinced. The LBO structure itself, they argue, was the critical amplifier of risk. When a private equity firm loads an acquired company with debt secured against that company's assets and cash flows — and then recoups its initial outlay through asset disposals — it systematically strips away the financial buffers that would otherwise absorb external shocks.

"In Homeplus's case, the repeated sale of prime store properties followed by leaseback arrangements meant the company had no capacity left to weather a downturn in retail conditions," said a professor of finance at a South Korean university. MBK did indeed raise trillions of won in liquidity through property disposals in the years following the acquisition, a process that left Homeplus with sharply higher fixed lease obligations.

The critics' central charge is this: a business that Tesco sold for more than 7 trillion won cannot be explained away as a victim of market forces alone when, within a decade, it requires court protection to survive.

A familiar pattern elsewhere

The storyline is not without precedent. In the United States, Sears — once the country's dominant retailer — filed for bankruptcy protection in 2018 after years of asset sales and spin-offs under the ownership of hedge fund ESL Investments, led by Edward Lampert. In Britain, department store chain Debenhams entered a company voluntary arrangement in 2019 following an LBO that saddled it with unsustainable debt, and was ultimately liquidated. In both cases, the pattern was the same: early profit extraction through asset monetisation, weakened financial capacity, and eventual collapse when trading conditions deteriorated. Academics and consumer advocacy groups in South Korea increasingly regard the Homeplus affair as the domestic edition of this global template.

The "responsible finance" speech in context

Chairman Kim's remarks at a recent public forum — in which he spoke of the private equity industry's social role and the importance of responsible investment — arrived at precisely the moment when MBK was facing its fiercest public criticism over Homeplus. Inevitably, this has generated competing interpretations.

Sceptics dismiss the speech as image management, little more than lip service designed to soften a damaging narrative. A more charitable reading, circulating in parts of the private equity industry, is that the comments signal MBK's intention to embrace ESG (environmental, social and governance) standards more robustly in future. Either way, words unaccompanied by action will carry little weight.

Legal and regulatory battles continue

Prosecutors are investigating the movement of funds between affiliated entities and the circumstances surrounding Homeplus's commercial paper issuances in the period around the receivership filing. MBK maintains that all procedures were conducted lawfully, but the legal exposure of the firm and its principals may change substantially depending on the outcome of that inquiry.

The affair has also reignited political debate about regulating private equity acquisitions of large retailers. Some members of the National Assembly's Political Affairs Committee are reportedly considering legislation that would restrict the disposal of core assets following LBO transactions, or tighten disclosure requirements around such deals.

What comes next

Whatever the outcome of the Homeplus receivership proceedings, the episode has generated sustained pressure for a broader regulatory review of South Korea's private equity industry. Items under discussion include mandatory disclosure of post-LBO asset monetisation arrangements, new protections for suppliers in the event of corporate insolvency, and stronger creditor safeguards at the pre-receivership stage.

The most sobering lesson of the Homeplus affair is this: responsible finance cannot be a slogan deployed at conferences. It must be an operating principle embedded in every stage of an investment — from deal structure to eventual exit, and through any difficulties in between. Whether Chairman Kim's words prove to be hollow rhetoric or the opening of a genuine reckoning will depend entirely on what MBK does next.