Lotte Group on Thursday denied liquidity crisis rumors sparked by Lotte Chemical Corp.’s struggle to meet bond redemption request after the South Korean petrochemical unit has widened losses over the past few years
The retail-to-chemical conglomerate said in a press release it sits on 71.4 trillion won ($5.1 billion) in real estate and deposits at financial institutions out of its assets of 139 trillion won as of the end of 2023.
The assets break down to 56 trillion won in real estate; 37.5 trillion won in shares; and 15.4 trillion won in deposits it can withdraw at any time.
Lotte Group said the petrochemical industry slowdown was the main culprit of the financial difficulty at Lotte Chemical.
It noted the No. 2 petrochemical company in South Korea has a financial capacity enough to redeem the principal of the bonds with 4 trillion won at hand, including about 2 trillion won in bank deposits.
Lotte Chemical is in disputes with its bond holders, who argued the company failed to meet some conditions attached to the bonds sold between September 2013 and March 2023, so Lotte must repay them even before the debts expire.
Their covenants contain the clauses that Lotte must keep its debt-to-equity ratio below 200%, based on its consolidated earnings for three years and its earnings before interest, tax, depreciation and amortization (EBITDA) must be at least five times bigger than its debt-servicing costs.
As of the end of September, its EBITDA fell to the multiple of 4.3, compared with the debt cost. Lotte said such clauses were removed for recently-issued bondx.
ONGOING RESTRUCTURING
Last month, Lotte Chemical announced it would sell a 40% stake in Lotte Chemical Louisiana LLC, its ethylene glycol production unit in the US, for 660 billion won this year.
It is also working on the sale of a stake in PT Lotte Chemical Indonesia to raise about 700 billion won.
“We plan to raise money by utilizing our stake in Lotte Chemical Indonesia, but its detailed terms and conditions have not been fixed yet,” it said in a regulatory filing on Friday.
The filing was made in response to the Financial Supervisory Service’s request to clarify a local media report last month that Lotte Chemical will raise 1.4 trillion won by using its subsidiaries in the US and Indonesia.
“Lotte Group keeps liquidity at a stable level and is working on asset efficiency. We focus on profitability-oriented management group-wide to improve our financial structure,” said a Lotte Group official.
Meanwhile, Lotte Chemical has decided to liquidate its rubber joint venture in Malaysia, after putting its Malaysian unit Lotte Chemical Titan Holdings on the market.
In the first nine months of this year, Lotte Chemical racked up 660.0 billion won in operating loss, nearly double of the 347.7 billion won shortfall it logged for the entire year of 2023.
Its share price nosedived to 64,800 won on Thursday, hitting its lowest point since the 2008 global financial crisis. On Friday, it ended little changed at 66,400 won.
By Jae-Kwang Ahn
ahnjk@hankyung.com
Yeonhee Kim edited this article.
