The sale of Lotte Rental's shares by Hotel Lotte is viewed as having a limited impact on corporate creditworthiness. This is based on the perception that poor performance continues in the main business despite an influx of about 1.6 trillion won.
On the 10th, Korea Credit Rating Agency issued a report titled 'Opinion on the signing of a memorandum of understanding for the sale of Lotte Rental shares of Hotel Lotte and Busan Lotte Hotel,' stating, 'While the financial burden is expected to ease, its impact on creditworthiness is limited.'
Earlier on the 6th, Hotel Lotte signed a memorandum of understanding related to the sale of Lotte Rental with the Hong Kong-based private equity firm Affinity Equity Partners. The sale includes 35% of Hotel Lotte's equity and 56.2% of Busan Lotte Hotel's equity.
Hotel Lotte and Busan Lotte Hotel are reportedly planning to use the proceeds from the sale of Lotte Rental to reduce borrowing funds and improve financial structure. It is anticipated that the equity sale will bring in approximately 1 trillion won for Hotel Lotte and 600 billion won for Busan Lotte Hotel.
Korea Credit Rating Agency said, 'However, the proceeds from the sale will only serve to ease the financial burden,' adding that 'Hotel Lotte and Busan Lotte Hotel are experiencing prolonged poor performance in the duty-free division despite improvements in the hotel and world sectors.'
In fact, Hotel Lotte recorded a cumulative loss of 28.5 billion won from the duty-free division up to the third quarter this year. Additionally, financial burdens have increased due to spending of 260 billion won on the additional equity acquisition following the Lotte Rental total return swap settlement.
Korea Credit Rating Agency stated, 'In the case of Hotel Lotte, not only the current equity sale but also the sale of 2 to 3 locations of Lotte City Hotels and L7 Hotels, as well as withdrawal from poorly performing duty-free stores are being considered,' adding that 'they plan to check for additional liquidity.'