CJ CGV Followed by Second Largest Cinema Operator
Performance and Financial Conditions Worsen Amid COVID-19 Spread
Mid-sized Companies Like Meritz Capital and Nepes Secure Liquidity
Continuous Support for CJ Foodville and LS Networks
[Asia Economy Reporter Lim Jeong-su] Lotte Cultureworks, facing difficulties due to the novel coronavirus infection (COVID-19) crisis, will issue 60 billion KRW in corporate bonds with support from the Korea Credit Guarantee Fund. Mid-sized companies such as Meritz Capital, Nepes, YG-One, and Sungwoo Hitech will also receive government funding.
According to the investment banking (IB) industry on the 14th, the Korea Credit Guarantee Fund will issue Primary Collateralized Bond Obligations (P-CBO) on the 20th, backed by corporate bonds worth 365.5 billion KRW (including some loans) issued by 76 companies. Among large corporations, Lotte Cultureworks, the second-largest domestic movie theater operator, is included in this government support program and will secure the most liquidity.
Lotte Cultureworks applied to purchase 100 billion KRW in corporate bonds but is known to have decided to issue only 60 billion KRW worth. The corporate bonds have a three-year maturity with an interest rate set at 2.041%. Lotte Cultureworks has been evaluated as having a relatively better financial condition compared to CJ CGV, but its performance and financial status have been deteriorating as COVID-19 continues.
Lotte Cultureworks recorded sales of 31.7 billion KRW in the second quarter of this year, a decrease of 82.2% compared to the same period last year. Operating losses increased to 50.6 billion KRW from 34.4 billion KRW in the first quarter. As borrowings rapidly increased, the debt ratio exceeded 355% at the end of June. Just six months ago, at the end of last year, the debt ratio was less than 200%.
The balance of ultra-short-term commercial paper (CP), which was zero until last year, also approached 30 billion KRW. As the maturity structure of borrowings shortened, the burden of short-term debt repayment increased. Contingent liabilities related to overseas subsidiaries, including the Vietnam branch, are also on the rise. An IB industry official said, "Lotte Cultureworks is expected to alleviate the burden of short-term debt repayment with the Korea Credit Guarantee Fund's support funds."
Among mid-sized companies, Nepes (50 billion KRW), YG-One (23 billion KRW), Meritz Capital (20 billion KRW), and Sungwoo Hitech (20 billion KRW) were included in this support program. Korea FT, Asian Fashion, Kookje General Machinery, Samkwang, Kotek, Unitrontech, Yongjin Steco, and Taeyang Metal Industry will also secure liquidity support from the Korea Credit Guarantee Fund ranging from 3 billion KRW to 10 billion KRW. Additionally, 63 small and medium-sized enterprises, including Cosmax NBT, Daehan Optical Communication, Dongsung Chemical Industry, Eugene Crebes, and Youngsan Concrete Industry, will issue corporate bonds with support from the Korea Credit Guarantee Fund.
The Financial Services Commission decided to issue P-CBOs worth 6.7 trillion KRW through the Korea Credit Guarantee Fund to support companies struggling with funding due to COVID-19. Separately, a P-CBO worth 1.7 trillion KRW has been allocated to support key industries. The support targets include not only existing small and medium-sized enterprises but also large corporations.
Accordingly, in May, CJ CGV, the number one domestic movie theater operator, and Hyundai Construction Equipment, affiliated with Hyundai Heavy Industries, each secured 65 billion KRW. In June, Doosan (50 billion KRW), CJ Foodville (40 billion KRW), Hyundai Construction Equipment (35 billion KRW), LS Networks (30 billion KRW), and CJ CGV (20 billion KRW) raised funds for debt repayment and operating capital through Korea Credit Guarantee Fund support. In July, Hyundai Electric & Energy Systems (50 billion KRW), Doosan (20 billion KRW), CJ Foodville (20 billion KRW), and LS Networks (15 billion KRW) also procured funds for debt repayment and operations with Korea Credit Guarantee Fund assistance.
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