This article was displayed on the ChosunBiz MoneyMove (MM) site at 3:10 p.m. on Apr. 9, 2026.
Lotte Chemical will issue corporate bonds totaling 400 billion won. It is a bank-guaranteed bond, which is highly unusual for a large conglomerate, designed to overlay a bank's credit to overcome the limits of its own credit profile and secure top-tier funding terms. Of course, it must provide collateral that suits the banks' preferences, and Lotte World Tower is being strongly discussed for that role.
Lotte Chemical also issued bank-guaranteed bonds two years ago, and with conditions not improving, it has decided to deploy the same approach again. It is seen as a pragmatic 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 an underwriting 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 corporate bonds will be guaranteed directly by commercial banks. Shinhan, KB Kookmin, Hana, and Woori Bank will enhance the bonds' credit to AAA with their own credit. The banks are expected to receive collateral such as Lotte World Tower, and they are said to be in talks with Lotte over the specific terms.
Corporate bonds directly guaranteed by commercial banks are considered an unusual decision for a large conglomerate. It is more common for an affiliate or the parent company to provide the credit enhancement.
The market expects the interest rate on Lotte Chemical's bank-guaranteed bonds to be around 4.1% per year. Because the issue will borrow the AAA credit of commercial banks, the rate is expected to be set by adding a 20–30 bp spread to the 3-year average secondary-market yield of bank bonds. Given that the current 3-year average secondary yield for AAA bank bonds is about 3.9% annually, the actual coupon will likely come in just above 4%.
Lotte Chemical's decision to again use bank guarantees is a measure to directly counter credit downgrade pressure stemming from a slump in the petrochemical business cycle. If it were to issue on its own credit (AA-), business conditions would push the rate to the mid-4% range or higher, but bank credit enhancement can significantly cut funding costs.
Lotte Chemical previously enhanced the credit of outstanding corporate bonds with bank guarantees in 2024. At the time, it pledged Lotte World Tower, valued at more than 6 trillion won, as collateral, and in return removed certain financial covenants in the bondholder management agreement. The latest bond issue is seen as a step prompted by the approaching maturity of those notes.
According to the industry, Lotte Chemical has 655 billion won in publicly offered corporate bonds maturing in the first half of this year. All of those issues carry bank payment guarantees from 2024.
As bond maturities approached, 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.