Hotel Lotte Raises 500 Billion KRW Through Corporate Bonds and Long-Term CP for Aggressive Fundraising

Issuance of 300 Billion KRW in Corporate Bonds and 200 Billion KRW in Long-Term CP Early This Year
Increased Support Burden for Affiliates to Manage Debt Maturities
Rising Operating Fund Pressure Including Duty-Free Shop Bidding

[Asia Economy Reporter Lim Jeong-su] Hotel Lotte is continuing aggressive fundraising by issuing an additional 200 billion KRW worth of long-term commercial paper (CP) following the issuance of 300 billion KRW in corporate bonds. It is interpreted that the overall demand for funds has increased due to domestic and overseas affiliate financial support or credit enhancement for companies such as Lotte Construction and Lotte Property Shenyang, as well as overlapping duty-free shop bidding.

Hotel Lotte recently issued CP worth 200 billion KRW. The maturity is 3 years, and the issuance interest rate is 4.6%. It was issued as a discount bond where investors receive 3 years' interest in advance, so the actual funds raised by Hotel Lotte were 172.4 billion KRW, less than the face value issuance amount. Approximately 27.6 billion KRW was paid as interest in advance. Since it is CP, it did not go through a public offering process such as demand forecasting. It is known that the underwriter, Daol Investment & Securities, purchased all the CP and sold it to institutional investors.

Hotel Lotte raised 300 billion KRW in January through a public corporate bond offering. At that time, 2-year and 3-year maturity corporate bonds were issued at an interest rate in the high 4% range. An industry insider said, "Hotel Lotte chose long-term CP because the procedure is simpler compared to public corporate bonds, and the lower interest rate of long-term CP compared to corporate bonds was an advantage."

Hotel Lotte has recently increased fundraising because loan maturities are concentrated in the first half of the year, and fund demand has significantly increased due to affiliate support and duty-free shop bidding. Hotel Lotte plans to use the funds raised through long-term CP to repay CP maturing in May. The previously issued corporate bonds will be used for repaying maturing corporate bonds and purchasing duty-free goods.

In addition, Hotel Lotte has recently faced increased financial support burdens for affiliates. Earlier this year, Lotte Construction provided subordinated funds to secure liquidity related to project financing (PF) worth 1.5 trillion KRW. Recently, Lotte Property Shenyang Corporation received a loan of 158 million USD (about 220 billion KRW) with credit enhancement support. Lotte Property Shenyang is a Hong Kong-based corporation invested in by Hotel Lotte and Lotte Construction, engaged in asset development projects in Shenyang, China. Similarly, credit enhancement support was provided for a hotel operator based in New York to raise funds.

An investment banking industry insider analyzed, "In the case of Hotel Lotte, after China's reopening (resumption of economic activities), duty-free shop operations have revived, increasing the need for operating funds to purchase duty-free products such as cosmetics," adding, "There is a large internal fund demand for bidding on downtown and airport duty-free shops and repaying maturing borrowings."

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