Lotte Corporation Signs Additional Funding Agreement Worth 110 Billion KRW with Lotte Construction
[Asia Economy Reporter Yuri Kim] Lotte Property & Development took additional guarantee measures on the 7th for Lotte Construction, which is experiencing financial difficulties due to issues such as the Legoland incident.
On the previous day, Lotte Property & Development announced that it had signed a capital supplementation agreement worth 110 billion KRW related to the credit transaction agreement between Lotte Construction and KB Green Energy First Limited Partnership. The agreement states that if Lotte Construction fails to repay the 100 billion KRW borrowed from KB Green Energy First Limited Partnership, Lotte Property & Development will provide the shortfall funds. The term lasts until the loan is fully repaid.
Earlier, on the 16th of last month, Lotte Property & Development signed a capital supplementation agreement for 200 billion KRW borrowed by Lotte Construction from Hana Bank, and on the 18th, for 150 billion KRW borrowed from Standard Chartered Bank Korea. The capital supplementation limits were set at 120% of the borrowings, amounting to 240 billion KRW and 180 billion KRW respectively. The total capital supplementation agreement by Lotte Property & Development amounts to 530 billion KRW, which is 120% of the 450 billion KRW borrowed by Lotte Construction.
Korea Ratings changed the credit rating outlook of Lotte Property & Development, which supported Lotte Construction last month, from AA- stable to negative, and also downgraded the credit ratings of Lotte Chemical and Lotte Holdings to negative. This movement has raised market concerns about the possibility of liquidity issues spreading throughout the entire group.
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However, Lotte dismissed these concerns, stating that the group has sufficient cash, cash equivalents, and short-term financial products amounting to about 15 trillion KRW, and maintains a financial soundness with a long-term debt ratio of around 70% of total borrowings. Previously, Chairman Shin Dong-bin demonstrated his commitment to responsible management by participating in a paid-in capital increase of Lotte Construction, investing 1.17254 billion KRW of personal funds to dispel market concerns.
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