[Funding] Etude in Capital Impairment, AmorePacific Supports Borrowing Arrangement

[Analysis and Graphics by Heejin Lim]

[Asia Economy Reporter Park So-yeon] Etude, which has fallen into a state of complete capital erosion, secured funds by using its parent company's time deposits as collateral.

According to the Financial Supervisory Service's electronic disclosure system on the 2nd, Amorepacific Group provided 41 billion KRW in time deposits as collateral for its subsidiary Etude to borrow 35 billion KRW from the Korea Development Bank. The borrowing period is from May 24, 2022, to May 24, 2023.

Previously, Amorepacific Group also provided 19 billion KRW in time deposits as collateral for Etude to borrow 17 billion KRW from Woori Bank.

As of the end of 2021, Etude's total borrowings amounted to 41 billion KRW, a 28.1% increase from 32 billion KRW the previous year.

Etude was in a state of complete capital erosion as of the 2021 fiscal year. It recorded continuous losses for four years from 2018 to 2021. The total capital, which is the sum of paid-in capital and surplus, was minus 6.6 billion KRW in 2020 and minus 23.8 billion KRW as of the end of 2021.

Due to continued operating losses, Etude conducted impairment tests and recognized impairments of 3 billion KRW in 2020 and 3.4 billion KRW in 2021.

In the market, there is cautious speculation that Etude may proceed with a paid-in capital increase targeting its parent company, Amorepacific Group, to escape from capital erosion.

However, even if Etude undertakes capital expansion, it is expected to be difficult to recreate past glory as the beauty market structure itself is changing due to the spread of non-face-to-face consumption culture and increased demand for luxury brands.

Amorepacific Group holds 80.5% of Etude's shares, and Seo Min-jung, the eldest daughter of Seo Kyung-bae, chairman of Amorepacific Group, holds 19.5%.

Meanwhile, Etude's compensation for key executives last year was 690 million KRW, an increase from 570 million KRW the previous year.

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