[Funding] 'Direct Hit from COVID-19' Paradise Group's Busy Battle to Secure Liquidity

[Asia Economy Reporter Lim Jeong-su] Paradise Group, which operates hotels, casinos, and resorts, is accelerating liquidity 확보 through loans and corporate bond issuance. Concerns are emerging over whether they can successfully secure liquidity as their credit rating has declined due to the spread of the novel coronavirus infection (COVID-19).

According to the investment banking (IB) industry on the 11th, Paradise Group affiliates are consecutively raising funds. Paradise is pushing forward with a public bond issuance worth 100 billion KRW, with Mirae Asset Daewoo and others as underwriters. At the end of last month, its affiliate Paradise Segasami borrowed 100 billion KRW with a joint guarantee from its parent company Paradise. Korea Investment & Securities and others managed the fund raising.

Paradise operates several hotels domestically and internationally, including the Walkerhill Hotel in Seoul, Maison Glad Hotel in Jeju, and Paradise Hotel Casino in Busan. In 2017, they opened the integrated resort Incheon Paradise City. Paradise is known to have issued corporate bonds to secure refinancing and operating funds. It is analyzed that the need for fund raising increased as sales dropped to less than half due to COVID-19.

Paradise Segasami plans to use the raised funds to repay existing borrowings procured for the second phase development project of the Incheon International Airport international business district. As of the end of 2019, it carries a debt burden of about 700 billion KRW, including project financing (PF) loans.

Paradise Segasami was established by Paradise Group in July 2012 to operate hotel and casino businesses. The following year, in 2013, it took over the Incheon Paradise Hotel casino business from Paradise Global. Currently, Sega Sammy Holdings of Japan and Paradise hold shares at a ratio of 45:55.

Paradise Group affiliates are in a situation where they must continuously secure liquidity. As of the end of June, Paradise’s consolidated borrowings, including Paradise Segasami, approach 1.4 trillion KRW. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are expected to sharply decrease from 163 billion KRW last year to around 30 billion KRW this year. With cash flow reduced to less than one-fifth, external fund raising is inevitable for debt repayment or operations. Costs must also be invested for restructuring due to the recession.

However, the outlook is predominantly that securing liquidity will not be easy. Credit ratings are declining, and there is no sign of performance recovery yet. An IB industry official said, "Expectations for a recovery in the industry in the short term are low, so it is uncertain whether demand for public bonds can be secured," adding, "They will have to respond to debt maturities as much as possible by utilizing held assets."