2 weeks Ago By [email protected](KoreaTimes)
Victims of payment delays by TMON and WeMakePrice participate in a demonstration calling for prompt recovery of their losses in front of the ruling People Power Party headquarters in Seoul, Sept. 8. Yonhap Gov’t speeds up efforts to amend laws to prevent recurrence of payment delay crisis By Jun Ji-hye All eyes are now on how much of the debt owed by cash-strapped TMON and WeMakePrice will be repaid as the two e-commerce platform operators, which were responsible for a massive payment and refund delay crisis, are set to undergo corporate rehabilitation procedures.
According to the Seoul Bankruptcy Court and industry officials, Wednesday, the two Korean affiliates of Singapore-based Qoo10 should submit their rehabilitation plans to the court by Dec. 27. The extent to which creditors can recover their losses is expected to become clearer at that time.
TMON and WeMakePrice applied for corporate rehabilitation with the bankruptcy court on July 29, stating that they were unable to resolve their financial issues on their own amid a massive cash crunch that caused delays in payments to sellers and refunds to customers. As of last month, the government identified approximately 48,000 vendors affected by unsettled payments from TMON and WeMakePrice, with the unpaid amount estimated at around 1.2 trillion won ($900 million).
The court, prior to commencing the rehabilitation process, approved a one-month-long autonomous restructuring support (ARS) program on Aug. 2, to allow for negotiations for voluntary debt restructuring However, after two rounds of meetings with creditors, the two companies failed to come up with a debt restructuring plan. On Sept.
10, the court decided not to extend the ARS program and is now reviewing whether to commence rehabilitation proceedings. WeMakePrice CEO Ryu Hwa-hyeon, left, and TMON CEO Ryu Gwang-jin speak to reporters in front of the Seoul Bankruptcy Court, Sept. 10, as the court announced a decision to review whether to commence rehabilitation proceedings for the firms.
Yonhap To commence the proceedings, the two firms are required to complete the process of confirming creditors and the amount of debt by mid-November. When TMON and WeMakePrice filed for corporate rehabilitation with the court, the number of creditors submitted was approximately 47,000 and 63,000, respectively, totaling about 110,000. These figures could change based on the creditor confirmation process.
Once this process is completed, EY Hanyoung, an accounting firm designated by the court, will conduct due diligence to determine whether the two companies still have enterprise value. If the court, based on the accounting firm’s review, determines that the value of continuing the business of the two online marketplaces is less than the value of liquidating their assets, it will declare bankruptcy. In this case, creditors will effectively not be able to recover their debts.
If the two pass this stage, they can submit a rehabilitation plan. If the court approves this plan, the companies can proceed with the rehabilitation process. The repayment rate that creditors are focusing on will be outlined in this rehabilitation plan.
This rate depends on the amount of funds TMON and WeMakePrice can raise through their ongoing merger and acquisition efforts. With few assets left to sell, if the companies are unable to secure buyers or investors, it will be difficult not only to settle their debts but also to maintain regular business operations. Market forecasts are mixed about whether there will be investors willing to acquire the cash-strapped e-commerce platforms, with some saying that TMON and WeMakePrice have already lost credibility of the market, while others saying that there may be investors who are interested in entering the high-growth e-commerce industry through the acquisition of the two.
The affected vendors are calling not only for debt repayment but also for the normalization of the platforms to avoid losing their sales channels. “We are clinging to a slim hope for a potential merger or acquisition,” said Shin Jeong-kwon, the representative of the affected vendors. “The crisis is due to management failures rather than issues with the platforms themselves, so we hope for the platforms to function as sales channels again.
” Read More Beleaguered e-commerce platform TMON says in talks for merger Gov't to provide $1.2 bil. in support for e-commerce vendors hit by TMON, WeMakePrice FTC to tighten e-commerce rules after collapse of TMON, WeMakePrice To prevent recurrence of the similar incidents, financial authorities are expediting the preparation to amend laws to require e-commerce platform operators to separately safeguard funds to be settled for vendors.
The authorities are also working to encourage sound management practices of electronic payment service providers. The Financial Services Commission, the country’s top financial regulator, will hold a joint public hearing with the Fair Trade Commission on Monday on these proposals. Following this, they plan to submit bills to revise relevant laws to the National Assembly.
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