Lotte desperate to secure cash to dispel concerns over liquidity crisis

The Korea Times

The Korea Times

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Tue, September 26, 2023 | 08:42

Companies

Lotte desperate to secure cash to dispel concerns over liquidity crisis

Posted : 2023-04-09 14:26

Updated : 2023-04-10 11:38

Representatives from Lotte Group and the nation's four largest commercial banks pose at Lotte World Tower in Seoul, Friday, after signing a memorandum of understanding regarding a 5 trillion won ($3.8 billion) financial support for the conglomerate. Courtesy of Lotte Group

By Park Jae-hyuk

Lotte Group is going all out to raise more money from domestic financial firms, amid the conglomerate's continuous efforts to dispel worries among market insiders over the company's financial soundness, according to industry officials, Sunday.

Last Friday, the group signed an agreement with KB Kookmin, Shinhan, Woori and Hana banks to draw a combined 5 trillion won ($3.8 billion) investment from them over the next five years. The money will be used to nurture Lotte's core businesses for the future, such as battery materials, green energy and biotech.

"The investment is expected to improve our credibility in the market," Lotte said in a press release.

The conglomerate's recent cooperation with the nation's four largest commercial banks came a few months after its construction unit agreed with Meritz Financial Group in January to create a 1.5 trillion won fund.

The fund enabled Lotte E&C at that time to overcome a liquidity crisis caused by difficulties in repaying its debts for project financing.

Before Lotte E&C joined hands with Meritz, Lotte Group's major affiliates had put up over 1 trillion won to rescue the cash-strapped builder. Lotte Group Chairman Shin Dong-bin's personal assets were even used for Lotte E&C, which was hit by the country's worsening housing market conditions.

In this regard, Financial Supervisory Service Governor Lee Bok-hyun praised the deal signed between Lotte and Meritz, saying that they pursued profitability and public interests at the same time.

As Lotte Group succeeded in securing the additional 5 trillion won, the conglomerate is expected to accelerate efforts to dismiss concerns over its large-scale investments in the chemical sector.

Local credit ratings agencies, however, saw that it will take more time for Lotte Group's affiliates to improve their credit ratings, because they are yet to improve their financial structures.

NICE Investors Service said that Lotte Group's ability to repay its debts has continuously weakened.

Its analysis is based on the conglomerate's deteriorating earnings from its petrochemical business and financial burdens caused by mega-size projects, including the LINE, a $4 billion project to build a giant petrochemical complex in Indonesia.

"Amid the financial burdens caused by the acquisition of Iljin Materials, Lotte has continued large-scale investments including the LINE Project," the credit ratings agency said. "Due to the burdens caused by its investments in biotech and healthcare sectors, the group will face difficulties in reducing its debts."

According to the agency, the size of Lotte Group's net debt rose to 28 trillion won as of September last year from 24.8 trillion won in late 2021.

pjh@koreatimes.co.kr