‘Yukeo Yuchi War’ Hyundai Department Store Duty Free Shop, Receiving Consecutive Funding with Support from Parent Company

Secured 200 Billion Won Liquidity through Securitized Loans and Paid-in Capital Increase
Parent Company Hyundai Department Store Provides Direct and Indirect Support

Hyundai Duty Free Shop

Hyundai Department Store Duty Free, a subsidiary of Hyundai Department Store Group's duty-free business division, is continuously raising funds with the support of its affiliates. This is interpreted as an effort to refinance existing borrowings while strengthening the duty-free business in anticipation of the resumption of travel by Yukeo (Chinese tourists).

According to the investment banking (IB) industry, Hyundai Department Store Duty Free secured a secured loan worth 100 billion KRW under the management of Hyundai Motor Securities, a securities firm affiliated with Hyundai Motor Group. The company received a one-year maturity loan from a special purpose company (SPC), which issued loan securitization bonds to raise the loan funds.

The procured funds are used to repay existing borrowings. Hyundai Department Store Duty Free had previously borrowed 100 billion KRW using the same method three years ago. The loan was backed by a credit provision from its parent company, Hyundai Department Store, through a capital replenishment agreement. If Hyundai Department Store Duty Free fails to repay the loan, Hyundai Department Store has committed to providing the necessary liquidity for repayment.

On the 25th, Hyundai Department Store Duty Free also received a capital injection of 100 billion KRW from Hyundai Department Store. The company issued 20 million common shares at 5,000 KRW per share, and Hyundai Department Store subscribed to the newly issued shares. Hyundai Department Store Duty Free is an unlisted affiliate wholly owned by Hyundai Department Store.

The capital injection will be used to strengthen the duty-free business. Starting from the third quarter of this year, the company plans to expand its duty-free stores at Incheon Airport to boost performance in line with the return of Yukeo. Recently, it was selected as a new operator for the DF5 zone at Incheon Airport, launching a luxury brand-focused duty-free business at Terminal 2 in July and Terminal 1 in August.

Researcher Lee Haeni of Eugene Investment & Securities forecasted, "With the return of Yukeo, Hyundai Department Store Duty Free is highly likely to turn profitable from the third quarter as it depletes inventory at both downtown and airport duty-free stores." An IB industry insider said, "Since Hyundai Department Store Duty Free is an unlisted company and has limited ability to raise funds independently due to prolonged duty-free business downturns, it will continue to secure funds for investments and other purposes through direct and indirect support from its parent company, Hyundai Department Store."