Lotte Songdo Shopping Town Secures 100 Billion KRW PF with Support from Lotte Shopping

[Asia Economy Reporter Lim Jeong-su] Lotte Shopping's project company, Lotte Songdo Shopping Town, established to build a mega complex shopping mall in Songdo, Incheon, has secured 100 billion KRW in project financing (PF) funds with support from Lotte Shopping. The funds will be used to repay existing loans and cover construction costs. Attention is focused on whether Lotte will fully resume construction after a prolonged period of stagnation.

According to the investment banking (IB) industry on the 6th, Lotte Songdo Shopping Town recently received a 100 billion KRW, 3-year maturity loan from a special purpose company (SPC) organized under the lead of Samsung Securities. The loan requires a lump-sum principal repayment at maturity. The loan was made possible as Lotte Shopping provided credit support such as capital supplementation agreements.

It is understood that most of the funds raised by Lotte Songdo Shopping Town were used to repay existing loans. The total borrowings of Lotte Songdo Shopping Town consisted entirely of 80 billion KRW in secured loans borrowed from Standard Chartered Korea (Korea SC Bank). As the secured loan taken for land acquisition recently matured, the funds were raised for refinancing purposes.

By repaying the existing loans, Lotte Songdo Shopping Town was able to release the collateral rights on the land provided to Korea SC Bank. The release of collateral is analyzed to have increased the capacity for additional fund raising. Approximately 20 billion KRW remaining after loan repayment is expected to be used for construction payments.

Attention is on whether Lotte Songdo Shopping Town will fully resume construction through additional fund raising. The complex shopping mall construction has been sluggish for over ten years since the land acquisition. However, pressure from Incheon City and local residents on Lotte has sparked movements to restart the remaining construction.

Lotte Shopping has stated that although it will be difficult to complete construction by the originally planned completion date of 2022, it intends to actively push forward with construction. An IB industry official said, "To start building construction, a large-scale PF will be raised to secure construction funds," adding, "We are paying close attention to additional fund raising."

Lotte Songdo Shopping Town is a project to develop a site located in Songdo-dong, Yeonsu-gu, Incheon Metropolitan City, by constructing a mart, department store, shopping center, officetel, cinema, etc., and then selling and leasing them. The shares were divided among Lotte Shopping (43.70%), Lotte Station (30.02%), Lotte Asset Development (9.38%), and Lotte Incheon Development (4.30%), but Lotte Shopping acquired all shares held by other affiliated companies.