[Asia Economy Reporter Lim Jeong-su] Lotte Shopping has refinanced the project financing (PF) loan it borrowed for the development project of Lotte Town Dongtan in Hwaseong Dongtan New Town.
According to the investment banking (IB) industry on the 28th, Lotte Town Dongtan raised 490 billion KRW in PF loans from a lending consortium including Hana Bank through a special purpose company (SPC). The loan maturity is 3 years with a lump-sum repayment at maturity. Based on collateral and repayment priority, the PF investors were recruited by dividing into senior tranche of 390 billion KRW and subordinated tranche of 100 billion KRW. Hana Bank acquired 130 billion KRW of the senior tranche and 100 billion KRW of the subordinated tranche.
The SPC issued asset-backed loans (ABL) and securitized notes based on the loan as underlying assets to secure loan funds. In this process, Hana Bank and KDB Industrial Bank executed ABLs to the SPC based on senior loans as underlying assets. Hana Bank provided credit enhancement for the securitized notes.
The procured funds will be used to repay existing borrowings. Lotte Town Dongtan is the project operator of the Dongtan New Town housing development project located in Hwaseong-si, Gyeonggi-do. It was established with 100% investment by Lotte Shopping. In 2017, it borrowed approximately 900 billion KRW to build a shopping town including Lotte Department Store, residential apartments, officetels, and more in the central anchor block area of the new town project site. As the maturity of the existing loan approached, it was refinanced.
This PF includes a condition that the loan must be repaid early if Lotte Shopping’s credit rating falls below A. Lotte Shopping’s credit rating is AA, providing a three-notch buffer before the early repayment trigger. However, due to sluggish domestic and overseas business performance, the rating outlook is ‘negative,’ and there is significant downward pressure on the rating.
An IB industry official said, "Lotte Shopping is improving its financial structure through store restructuring, asset sales, and performance improvements in department stores and discount stores," adding, "Especially, Lotte Town Dongtan is located in the central area of Dongtan New Town, so its business feasibility is expected to be good."
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