Lotte Shopping Reassesses Land Assets After 15 Years
Lotte Chemical: "No Issues with Corporate Bond Principal Repayment"
Lotte Construction Tightens Control Over Troubled Projects
Lotte World Tower. On the 27th, Lotte announced that it will provide the 'Lotte World Tower,' a symbol of the Lotte Group, as collateral to expedite the resolution of Lotte Chemical's corporate bond issue.
Lotte Group has decided to mobilize all possible self-help measures, including asset revaluation, sales, and investment reduction, to quell market 'liquidity concerns.' Major affiliates such as Lotte Shopping, Lotte Chemical, and Lotte Construction have also introduced measures like real estate asset revaluation, expenditure reduction, and accelerated disposal of non-performing business sites.
On the afternoon of the 28th, major Lotte affiliates held an investor relations (IR) briefing for institutional investors at the Teachers' Pension Hall in Yeouido, Seoul, where they announced these self-help plans. About 300 institutional investors attended the briefing.
At the briefing, hosted by Lotte Holdings, major affiliates including Lotte Chemical, Lotte Construction, Hotel Lotte, and Lotte Shopping explained their financial status and value-up (corporate value enhancement) strategies.
Lotte Shopping Conducts Land Asset Revaluation for the First Time in 15 Years
Lotte Shopping announced that it will revalue its land assets worth 7.6 trillion KRW for the first time in 15 years. The asset revaluation aims to reflect the actual value of assets and improve the financial structure, marking the first such move since 2009.
Through asset revaluation, Lotte Shopping expects to enhance financial soundness by increasing capital, reducing debt ratio, and improving credit ratings. The revaluation conducted in 2009 resulted in a valuation difference of 3.6 trillion KRW, lowering the debt ratio from 102% to 86%, a 16 percentage point decrease.
Lotte Department Store is also pushing for the sale of underperforming stores, including the Busan Centum City branch, to improve store efficiency.
Lotte Chemical: "Sufficient Liquidity... Implementing Expenditure Reduction Measures"
Lotte Chemical emphasized that despite the global petrochemical industry's downturn causing losses, it has secured sufficient liquidity and has no issues repaying principal and interest on corporate bonds. However, it expects to recover from poor performance only by 2030. Given that investment costs are currently high compared to business profits, it also stressed plans to implement expenditure reduction measures.
On the previous day, Lotte announced that to quickly resolve the Lotte Chemical corporate bond issue, it would provide the 'Lotte World Tower,' a symbol of Lotte Group, as collateral. Lotte Chemical plans to negotiate with bondholders to adjust financial covenants under the condition of securing bank guarantees backed by the Lotte World Tower as collateral, thereby strengthening the creditworthiness of the corporate bonds.
In particular, adding bank guarantees secured by the Lotte World Tower as collateral to the corporate bonds will enhance the bonds' credit rating to the level of the bank's creditworthiness. The amount of corporate bonds at risk of losing interest benefits is 2.045 trillion KRW. As of last month, Lotte Chemical's available liquidity, including deposits of 2 trillion KRW, totals 4 trillion KRW.
Earlier, Lotte Chemical revealed a strategy to reduce the proportion of basic chemical assets in its portfolio to below 30% by 2030 and gradually increase the share of advanced materials to grow sales to 8 trillion KRW.
Lotte Construction Tightens Disposal of Non-performing Business Sites
Lotte Construction is facing difficulties due to the real estate market downturn but currently has no liquidity issues thanks to its own deposits and plans to tighten the disposal of non-performing business sites. Its cumulative sales from Q1 to Q3 reached a record high of 6.0284 trillion KRW, but total liabilities amount to 5.9 trillion KRW.
Lotte Construction explained that it is increasing sales mainly in Seoul and the metropolitan area to reduce the risk of unsold units and is disposing of non-performing business sites to reduce interest expenses. Since Lotte Construction's business is more concentrated in the metropolitan area than in provincial regions, it expressed confidence that the market risk is not as severe as concerns suggest.
Hotel Lotte, which also holds significant real estate assets, proposed liquidity securing measures including collaboration with Lotte REITs (Real Estate Investment Trusts). There was also a proposal to sell assets of hotel brands such as 'L7' and 'City.'
If liquidity concerns are not alleviated despite these self-help measures presented by each affiliate, Lotte plans to actively respond by utilizing available deposits, proceeds from equity sales, and real estate assets.
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