This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:10 p.m. on Apr. 9, 2026.
Lotte Chemical will issue a total of 400 billion won in corporate bonds. These are bank-guaranteed bonds, allowing it to overcome the limits of its own creditworthiness with the help of commercial banks and secure top-tier funding terms. Of course, it must provide collateral that suits the banks, and Lotte World Tower is reportedly the leading candidate.
Lotte Chemical also issued bank-guaranteed bonds two years ago, and with conditions not improving, it has decided to use the same approach again. It is seen as a practical choice to eliminate funding uncertainty even if it pays additional guarantee fees.
According to the investment banking (IB) industry on the 9th, Lotte Chemical is forming a syndicate to issue 400 billion won in commercial bank-guaranteed bonds. So far, KB Securities, NH Investment & Securities, Kiwoom Securities, and Hana Securities have joined.
These bonds are directly guaranteed by commercial banks. Shinhan, KB Kookmin, Hana, and Woori Bank will enhance the bonds' credit quality to AAA with their own credit. The banks are expected to receive collateral such as Lotte World Tower, and they are said to be discussing specific terms with Lotte.
Corporate bonds directly guaranteed by commercial banks are considered rare for large conglomerates. It is more common for an affiliate or a parent company to provide the credit enhancement.
The market expects the coupon on Lotte Chemical's bank-guaranteed bonds to be formed around an annual 4.1%. Because the bonds are issued by leveraging the AAA credit of commercial banks, the rate is expected to be set by adding a 20–30 bp spread to the 3-year bank bond fair value yield. Given that the current 3-year AAA bank bond fair value yield is around an annual 3.9%, the actual issue rate will likely come in just above 4%.
Lotte Chemical has once again turned to bank guarantees to directly counter downward pressure on its credit rating stemming from the petrochemical downturn. If it issued on its own credit (AA-), it would have to bear high rates in the mid-4% range or higher as the industry cycle is reflected, but it can sharply reduce funding expense through banks' credit enhancement.
Lotte Chemical also received bank guarantees in 2024 to enhance the credit quality of previously issued bonds. At the time, it pledged Lotte World Tower, valued at more than 6 trillion won, as collateral, and in return removed financial covenants in the bond administration agreement with bondholders. This bond issuance is seen as a response to the approaching maturity of those notes.
According to the industry, Lotte Chemical has a total of 655 billion won in publicly offered corporate bonds maturing in the first half of this year. All of those tranches carry bank payment guarantees from 2024.
As bond maturities neared, Lotte Chemical sought to return to the public corporate bond market in the second half of last year but abandoned the plan due to a credit rating downgrade caused by continued losses.