Lotte Chemical assures investors it can pay back its debts

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Lotte Chemical assures investors it can pay back its debts

Published: 21 Nov. 2024, 19:53

KIM JU-YEON
[email protected]

Lotte Chemical’s plant in Yeosu, South Jeolla [LOTTE CHEMICAL]

Lotte Group, rumored to be facing a liquidity crisis, assured investors Thursday that subsidiary Lotte Chemical has enough cash to pay back its debts despite having breached the terms of its loan covenant.

In September, the conglomerate's chemical subsidiary breached its loan covenant for corporate bonds issued from 2013 to last year, which required the chemicals manufacturer to retain earnings before interest, taxes, depreciation and amortization, or Ebitda, five times its cumulative interest expenses over the past three years. Concerns over the subsidiary's liquidity caused both firms' stocks to suffer earlier this week.

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The covenant has since been deleted from the recent debenture.

Lotte Group also said that it had 139 trillion won ($99.2 billion) in assets, including deposits, as of last month. The group had 37.5 trillion won worth of shares, real estate valued at 56 trillion won and 15.4 trillion won in disposable deposits as of that time.

Lotte Chemical is currently in discussions with its bondholders to adjust the agreement, Lotte Group said. The subsidiary is working to improve its cash flow by adjusting its investment plans and restructuring noncore businesses, including its liquidation of Lotte Ube Synthetic Rubber Sdn. Bhd., its rubber joint venture in Malaysia, in October.

Lotte Chemical plans to secure a total of 1.3 trillion won in liquidity by using its overseas subsidiaries’ stocks, of which 660 billion won was raised earlier this month, and plans to raise the remaining 650 billion won before the end of this year.

Lotte Chemical had posted weak third quarter earnings earlier in November with oversupply dampening its performance. Lotte Group said its profitability had dropped due since 2018 due to waning demand from China, alongside the country's rise in self-sufficiency, and an overall slump in the petrochemical industry in its Thursday statement.

Lotte Group said it will “maintain stable management in cooperation with its affiliates and secure sufficient liquidity for its financial stability if needed."

BY KIM JU-YEON [[email protected]]