[Funding] Lotte Hotel New York Secures $80 Million Liquidity Support from Hotel Lotte

Repayment of Loans and Operating Funds for New York Palace Hotel
Hotel Lotte Faces Increased Burden Supporting Emergency Overseas Hotel Funding
Worsening Financial Condition Due to Rising Loans Amid Poor Performance

Lotte Palace Hotel located in New York, USA

[Asia Economy Reporter Lim Jeong-su] Hotel Lotte is continuously supporting emergency liquidity procurement for overseas hotels suffering from prolonged poor performance due to COVID-19. In addition to the increased burden of Hotel Lotte's own borrowings, the support burden for overseas hotels is also on the rise.

According to the investment banking (IB) industry on the 22nd, Lotte Hotel New York Palace, LLC secured foreign currency funds amounting to 80 million USD (approximately 90 billion KRW) under the lead management of Kiwoom Securities. The loan maturity is one year, with a lump-sum principal repayment condition at maturity.

Hotel Lotte provided credit support such as capital replenishment commitments for Lotte Hotel New York Palace's fund procurement. This means that if Lotte Hotel New York Palace faces difficulties in repaying borrowings due to poor performance and lack of funds, Hotel Lotte will support the shortfall.

Lotte Hotel New York Palace is a hotel located in New York, USA, wholly owned by Lotte Hotel Holdings USA. Lotte Hotel Holdings USA is a subsidiary of Hotel Lotte and serves as the holding company for the US hotel sector.

As hotel management has become difficult due to COVID-19, the need for funds for operations and loan repayments has recently increased. Since Lotte Group acquired New York Palace Hotel for 900 billion KRW, it has continued to operate at a loss. The financial burden has grown further since last year due to the overlap with COVID-19.

The situation is similar for Hotel Lotte’s European hotels. Lotte Europe Holdings, a 100% subsidiary of Hotel Lotte, also procured foreign currency funds worth 100 million euros (approximately 135 billion KRW) in April under the lead management of Shinhan Bank. This was also for securing emergency operating funds, with Hotel Lotte providing credit support.

Lotte Europe Holdings is a Netherlands-based European regional holding company wholly owned by Hotel Lotte. It was established in 2008 to comprehensively manage Russian hotels, department stores, confectionery businesses, and European subsidiaries.

With the main businesses such as duty-free and hotels underperforming, and the increasing credit support burden for overseas hotels, Hotel Lotte’s borrowings are rapidly increasing.

Borrowings, which were 5.63 trillion KRW at the end of 2017, rose to 9.32 trillion KRW by the end of the first quarter this year. During the same period, net borrowings increased from 4.25 trillion KRW to 7.25 trillion KRW. The change in accounting standards, which recognized lease liabilities as borrowings, also contributed to the expansion of borrowings.

Due to continuous deficits over several years, Hotel Lotte has no choice but to rely on borrowings for loan repayments and hotel operations. An IB industry official said, "Hotel Lotte’s financial condition is deteriorating as the duty-free business declines and both domestic and overseas hotel businesses face difficulties," adding, "Financial burdens are expected to continue increasing for the time being."

This content was produced with the assistance of AI translation services.