Korea's tallest skyscraper posted as collateral as owner fights liquidity crunch rumors

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Korea's tallest skyscraper posted as collateral as owner fights liquidity crunch rumors

Published: 27 Nov. 2024, 15:10 Updated: 28 Nov. 2024, 17:35

KIM JU-YEON
[email protected]

At 555 meters (1,820 feet), the Lotte World Tower in Songpa District, southern Seoul is Korea's tallest skycraper. [LOTTE]

Lotte Corporation said it would pledge Lotte World Tower, Korea's tallest skyscraper and the sixth-tallest building in the world, as collateral to secure its bonds in an effort to quell investor concerns regarding reported liquidity problems stemming from its ailing chemical affiliate.

The holdings company announced Wednesday that it would post the popular tourist attraction in Songpa District, southern Seoul, as a guarantee to bondholders that their principal and interest would be repaid. The announcement follows reports that subsidiary Lotte Chemical failed to meet the terms of a pact with its bondholders, potentially enabling investors to declare an event of default and demand early redemption.

"We are addressing market concerns and sending a message that there is no problem with Lotte Chemical's liquidity," Lotte Corporation said.

Lotte Chemical assures investors it can pay back its debts

Lotte Group has faced pressure from investors to improve its cash flow since the announcement of its chemical affiliate's breach, which caused its shares to sharply fall earlier this month. In a regulatory filing released Tuesday night, it announced a plan to increase its cash dividends and consider canceling its treasury stock, targeting a shareholder return ratio of more than 35 percent by 2026.

The conglomerate admitted that Lotte Chemical's profit had declined in recent times due to oversupply but denied the reported liquidity problems on Thursday, assuring investors that it maintained stable liquidity and that the chemical firm had enough cash to pay back the principals of its corporate bonds and planned to secure cash via its overseas subsidiaries' shares. The holdings firm said its affiliate had 4 trillion won ($2.9 billion) in cash, which includes 2 trillion won in deposits, as of October on Wednesday.

Lotte Group disclosed that it had 139 trillion won in assets, including deposits, as of October. Lotte’s current shareholder return rate is around 30 percent.

Lotte Holdings announced its value-up plan for Lotte Group on Tuesday. [LOTTE HOLDINGS]

Lotte also said in its Tuesday filing that it plans to expand its portfolio to include businesses other than its core focuses of retail, foods, chemicals and construction; achieve carbon neutrality until 2050; improve finances for its subsidiaries; and keep a 80 percent compliance rate to key indicators of its governance.

The group plans to develop its contract development and manufacturing organization for biologics, EV charging infrastructure, rechargeable battery materials and metaverse platform businesses as new growth engines.

Shares of Lotte Corporation ended at 20,900 won, up 2.45 percent from the previous trading session.

BY KIM JU-YEON [[email protected]]