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MBK Partners is set to work on a 340 billion won ($287 million) recapitalization of South Korean home goods retailer Modern House, industry sources said on Wednesday.

The private equity firm is in discussions with three Seoul-based brokerage firms about terms and conditions of recapitalization. About two thirds of the amount will be used to repay existing debt, with the rest of approximately 100 billion expected to be distributed to the firm’s limited partners.

This is the first attempt by MBK Partners to recapitalize the retailer. Modern House, operated by MH & Co, was acquired by the firm in August 2017 in a 640 billion won deal. Roughly 340 billion won of the acquisition cost was funded through debt financing.

The recapitalization comes after the retailer’s earnings showed signs of strong recovery. Modern House recorded revenue of 179.4 billion won in the first half of 2021, up 7% year-on-year. Operating profit jumped 67% to 12.4 billion won in the same period, and earnings before interest, taxes, depreciation and amortization (EBITDA) grew 30% to 25.1 billion won.

This represents a strong improvement from recent years. MBK Partners’ investment had been intended to create synergies between Modern House and Homeplus, the South Korean supermarket chain owned by the private equity firm. But that strategy didn’t work well as Homeplus was hit by rising labor costs and the rapid shift of consumer behavior to online.

Modern House’s revenue rose from 335.4 billion won in 2018 to 359.7 billion won in 2019, but plunged to 247.4 billion won in 2020. EBITDA was 31.9 billion won and 31.4 billion won in 2018 and 2019, respectively, and climbed to 41.9 billion won in 2020.

Modern House has been stepping up efforts to expand its omnichannel presence in order to diversify sales channels beyond offline and capitalize on the shift to online shopping accelerated by the Covid-19 pandemic. At the same time, it has continued to expand the number of its stores by establishing strategic partnerships with retail majors including Lotte, Hyundai and Starfield.

The improvement in performance was also driven by a surge in demand for home furnishing, with people continuing to stay more time at home during the pandemic.

MBK Partners’ partial exit from Modern House comes after the private equity firm made two successful exit deals earlier this year. It sold its controlling stake in Chinese logistics provider Apex International Corporation to Swiss logistics firm Kuehne & Nagel for more than 800 billion won, representing a money multiple of 4.5 times and a 37% internal rate of return.

MBK Partners also agreed in August to sell a 100% stake in Doosan Machine Tools, a South Korean machine tool maker, to DTR Automotive for about 2.4 trillion won. The exit is set to generate a return of six times invested capital and a 50.9% internal rate of return.

The firm is also working with Morgan Stanley to dispose its stake in Japan’s Accordia Next Golf, which is expected to fetch approximately 4 trillion won. (Reporting by Hee-yeon Han)