[Corporate Financing] E-Land Retail Raises 100 Billion Won Through Accounts Receivable Securitization

[Asia Economy Reporter Lim Jeong-su] E-Land Retail has injected 100 billion KRW in funds by securitizing future accounts receivable from its department stores and outlet stores. KDB Industrial Bank and IBK Industrial Bank have provided financial and credit support.

According to the investment banking (IB) industry on the 29th, E-Land Retail raised 100 billion KRW through the issuance of asset-backed commercial paper (ABCP) and asset-backed loans (ABL). In this process, the future cash flows from accounts receivable generated over the next three years at NC Department Store Gangseo Branch, NewCore Outlet Pyeongtaek Branch, and Incheon Branch were provided as underlying assets (a type of collateral). The structure repays the borrowings with funds collected from credit card sales receivables generated at these three retail stores.

KDB Industrial Bank and Woori Bank executed a total of 50 billion KRW in ABL, with 30 billion KRW and 20 billion KRW respectively. Institutional investors, including these banks, will receive priority repayment of ABL and ABCP once the receivables are collected, and any remaining cash will be retained by E-Land Retail. If the accounts receivable generated are less than expected due to decreased sales at the department stores and outlets, E-Land Retail has agreed to supplement the funds necessary for principal and interest repayment of the borrowings.

E-Land Retail must repay the borrowings early before maturity if its long- and short-term credit ratings fall below BBB- or A3-, or if the ratings are withdrawn. Currently, E-Land Retail’s credit ratings are BBB+ and A3+, leaving two notches before the forced repayment trigger.

IBK Industrial Bank, the lead arranger for the funding, provided a purchase guarantee agreement for the ABCP. This means that if existing investors do not reinvest during the CP rollover process and no new investors appear, the bank will purchase the CP on their behalf. Additionally, a liquidity provision agreement was made to cover any shortfall in funds for CP repayment.

An IB industry official said, "Due to the somewhat tightened capital market caused by the COVID-19 pandemic, it has been difficult for E-Land Retail, which has a relatively lower credit rating compared to other large corporations, to raise funds easily. They are securing funds for debt repayment and operations by utilizing primary collateralized bond obligations (P-CBO) supported by the Korea Credit Guarantee Fund and accounts receivable securitization."

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