LOTTE Chemical, a major subsidiary of LOTTE Group, has decided to fully repay 545 billion won worth of corporate bonds maturing this year in cash. While it typically uses refinancing methods, LOTTE Chemical is facing a situation where there is no investor demand, making new issuance difficult.
LOTTE Chemical's cash and cash equivalents for the first quarter are approximately 1.7498 trillion won. One-third of this will be used for the repayment of corporate bonds this year. The company states that there are no issues with the repayment of corporate bonds due to sufficient internal cash.
According to LOTTE Chemical on the 7th, corporate bonds worth 100 billion won are maturing this month, and 275 billion won are maturing next month. These are bonds that were secured with LOTTE Tower as collateral after an event of default (EOD) occurred last November. Additionally, 170 billion won worth of corporate bonds will also mature in September.
Since the 'liquidity crisis rumors' that shook LOTTE Group last November, LOTTE Chemical has been securing liquidity by restructuring some of its businesses. This year, it sold its entire 75.01% equity stake in LCPL, a subsidiary producing and selling high-purity terephthalic acid (PTA) in Pakistan, securing about 97.9 billion won, and also liquidated a 4.9% stake in a Japanese specialty chemicals company, Rezonak, for 275 billion won.
LOTTE Chemical secured 650 billion won through a price return swap (PRS) contract with some of its shares in its Indonesia and U.S. subsidiaries. PRS is a derivative that trades on price fluctuations. Last month, it is estimated that the company gained billions of won by liquidating a production plant for water treatment membranes.
Due to oversupply from China and a global demand recession, the petrochemical industry is in crisis. LOTTE Chemical has also been unable to escape from poor performance for several years. Beginning with an operating loss of 762.6 billion won in 2022, it has recorded continuous losses of 347.7 billion won in 2023, 894.1 billion won in 2024, and 126.6 billion won in the first quarter of 2025.
On the 30th of last month, the top three credit rating agencies in the country downgraded LOTTE Chemical's credit rating from AA to AA-. As the credit rating of LOTTE Chemical, its major subsidiary, falls, the credit ratings of four other affiliates, including LOTTE Corporation, have also been downgraded.
When the credit rating falls, issuing corporate bonds becomes more difficult or results in higher issuance rates. LOTTE Chemical has not issued corporate bonds since September 2023, as there is a consensus among industry insiders that there is no new investor demand.
A LOTTE Chemical official noted, 'We are reviewing the repayment of all bonds maturing this year, but depending on the financial market situation, we are also considering sourcing some funds.'