[비즈한국] The fates of Jeongyookgak and Choroc Village, which both entered corporate rehabilitation procedures in July of last year, have diverged after about a year. While Choroc Village had its rehabilitation plan approved as its creditors—comprised of partner companies, franchise owners, and eco-friendly farms—stepped in to acquire it directly, the parent company, Jeongyookgak, has had its rehabilitation proceedings terminated, increasing the likelihood of bankruptcy.
Choroc Village Saved by Creditors... Kickstarting Normalization with 5.3 Billion Won Injection
Choroc Village, a retailer specializing in eco-friendly and organic food, is on the verge of concluding its rehabilitation proceedings. Following the approval of its rehabilitation plan at a creditors' meeting held on the 28th, the court also granted its formal approval for the plan on the same day. The Seoul Rehabilitation Court stated, "The rehabilitation plan submitted by the administrator was passed at the creditors' meeting and is recognized as meeting the requirements set forth by the Debtor Rehabilitation and Bankruptcy Act," thereby approving Choroc Village's plan.
Choroc Village had been pursuing M&A since entering rehabilitation in July of last year. Although it selected Samil PricewaterhouseCoopers as the lead manager for the sale and proceeded with a pre-packaged M&A, it struggled to secure a buyer. Eventually, a creditors' council consisting of partner companies, franchise owners, and eco-friendly farms stepped forward to acquire the company directly.
The creditors' council included a plan to acquire the company's shares and management rights through a capital increase via a new entity in the rehabilitation plan. The plan was passed at the creditors' meeting on the 28th with the support of 67.52% of the total voting rights of rehabilitation creditors, successfully clearing the 66.67% (two-thirds) threshold required for approval.
The total acquisition price for Choroc Village is 5.3 billion won. Of this, approximately 1 billion won will be used to repay rehabilitation debts. The repayment rate for the approximately 30 billion won in rehabilitation debt is 3.25%. Separately, the company plans to repay public interest claims amounting to approximately 12 billion won sequentially through future operations.
What stands out is that a significant portion of the acquisition funds has been set aside for company operations rather than debt repayment. As 2.5 billion won out of the total 5.3 billion won will be used as operating capital, it is interpreted that the creditors have placed more weight on maintaining operations and normalizing management than on immediate debt recovery. For franchise owners, Choroc Village is the foundation of their business, and for suppliers and eco-friendly farms, it is a key client and distribution channel, meaning the company's normalization is directly linked to protecting their own business foundations.
Following the approved plan, Choroc Village is expected to proceed with subsequent steps such as debt repayment and debt-to-equity swaps. Once the main implementation procedures are finalized around September, the company is expected to apply to the court for the conclusion of its rehabilitation proceedings. Afterward, it plans to focus on restructuring its business and improving profitability to establish a self-reliant management foundation.
An official from the Choroc Village creditors' council stated, "We plan to convert existing company-operated stores into franchises and will consider opening new stores once management stabilizes. We intend to promote management normalization by enhancing competitiveness through brand renewal and maintaining the eco-friendly and organic distribution ecosystem."
Jeongyookgak, Which Once 'Swallowed a Whale,' Ultimately Faces Termination of Rehabilitation
While Choroc Village has moved a step closer to management normalization through direct acquisition by its creditors, Jeongyookgak has faced the opposite outcome. Jeongyookgak submitted an application for the termination of rehabilitation proceedings to the court on the 11th. It appears they judged that it was no longer feasible to continue the process. Ten days later, on the 21st, the court decided to terminate Jeongyookgak's rehabilitation proceedings, stating, "It has become clearly evident that the liquidation value of the debtor's business exceeds its going-concern value."
Founded in 2016, Jeongyookgak is a fresh livestock product retailer. It grew rapidly by shortening distribution stages from slaughter to delivery and building its own logistics system. In 2020, it gained industry attention for its growth potential, being selected as a "Baby Unicorn."
However, unlike its outward growth, profitability failed to improve. While revenue grew from about 100 million won in 2016 to 40.1 billion won in 2021, operating losses widened from 90 million won to 25.1 billion won during the same period. Jeongyookgak never turned a profit after beginning operations.
In the midst of this, Jeongyookgak expanded its scale in 2022 by acquiring Choroc Village from Daesang Group for approximately 87.6 billion won. At the time, Jeongyookgak's annual revenue was only around 40 billion won, while Choroc Village generated about 200 billion won. As a 6-year-old startup took on a company five times its size, industry observers commented that "the shrimp swallowed the whale."
However, the acquisition of Choroc Village became a factor that further increased Jeongyookgak's financial burden. After the acquisition, Choroc Village's performance did not rebound, leading to declining revenue and widening operating losses. Revenue fell from 202.2 billion won in 2021 to 178.8 billion won in 2023, while operating losses grew from 4.1 billion won to 8.6 billion won over the same period.
The company also faced difficulties in securing acquisition funds. With the combination of rising interest rates and a cooling investment climate as the payment deadline approached, its initial fundraising plans hit a snag. Jeongyookgak covered the shortfall with bridge loans and existing cash reserves. Although it later attempted to cut costs by liquidating new businesses and restructuring its workforce, it was insufficient to resolve the accumulated financial burden.
The termination of Jeongyookgak's rehabilitation proceedings does not immediately lead to bankruptcy. However, since the court determined that the liquidation value is higher than the going-concern value, the possibility of the company moving toward bankruptcy and liquidation has increased.
An industry insider commented, "I understand that Jeongyookgak considered options like selling its brand during the rehabilitation process, but it did not come to fruition. While Choroc Village was able to maintain a certain level of revenue by continuing online sales and franchise operations, it seems that Jeongyookgak lacked a stable business foundation to support itself, which created the difference."