Lotte Chemical "Capital Increase for Iljin Acquisition... Resolving Construction Funding Difficulties"

[Asia Economy Reporter Oh Hyun-gil] Lotte Chemical explained on the 21st that the capital increase worth 1 trillion KRW is funding for the acquisition of Iljin Materials. It dismissed the possibility of additional capital support for Lotte Construction, stating that its financial difficulties have been somewhat resolved.

Kim Yeon-seop, Head of ESG (Environment, Social, Governance) at Lotte Chemical, said at the capital increase conference call held that day, "The risks related to Lotte Construction have been resolved to a considerable extent. I understand that the urgent situation has passed, and we believe there is no need for significant concern anymore."

Lotte Chemical announced on the 18th that it decided on a rights offering capital increase totaling 1.105 trillion KRW. The purpose of the fund raising is 500 billion KRW for operating funds and 605 billion KRW for acquiring securities of other companies. Some speculated that this capital increase might be a measure considering additional funding for Lotte Construction.

Previously, Lotte Chemical agreed to lend 500 billion KRW to Lotte Construction, which is experiencing financial difficulties, and participated in the capital increase by investing 87.6 billion KRW. Lotte Chemical is the largest shareholder of Lotte Construction.

Kim explained, "Most of the businesses held by Lotte Construction are sound, but recently they have experienced temporary cash flow tightening due to incidents such as the Legoland case. The financial support is because Lotte Construction is a major strategic partner of Lotte Chemical."

He added, "Lotte Construction is the main contractor for the businesses in which Lotte Chemical invests and possesses construction know-how for many facilities related to our company. Considering these factors and the possibility of fund repayment, we decided to participate in the capital increase and provide loans."

Additionally, Kang Jong-won, Chief Financial Officer (CFO) of Lotte Chemical, said, "Our loan has a three-month maturity, due on January 18, and there are currently no plans to extend the maturity. We understand that Lotte Construction is currently preparing self-help measures."

He added, "Although it is difficult to disclose specific figures, we have itemized plans for Lotte Construction's project financing (PF) reduction. Therefore, a significant amount is expected to be resolved by the fourth quarter of this year and into next year."

The main purpose of this capital increase is to raise funds for acquiring Iljin Materials, the second-largest copper foil manufacturer in Korea. Lotte Chemical has agreed to acquire Iljin Materials for 2.7 trillion KRW.

CFO Kang explained, "We expect to cover 1 trillion KRW through internal funds including the capital increase, and the remaining 1.7 trillion KRW will be borrowed externally. We are currently in discussions with financial institutions regarding the borrowings." He added, "Some progress has been made in the negotiations, and we plan to receive firm commitments from financial institutions by the end of the year. The process is currently proceeding without major difficulties."

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