Lotte Construction said on the 7th it issued 300 billion won in asset-backed securities (ABS) with an AAA credit rating, using construction payment claims from dwellings projects nearing completion and construction sites of group affiliates.
The securitization is divided into two tranches by repayment period. 150 billion won matures in one year, and the remaining 150 billion won is structured to mature in one year and three months. KB Securities, Hana Securities, Kiwoom Securities, Samsung Securities, and Korea Investment & Securities Co., among other major financial firms, participated in the underwriting.
This fundraising is the second issuance following the first ABS based on construction payment claims conducted in May. Lotte Construction strengthened both the underlying asset composition and credit enhancement this time to improve stability. In addition, with credit support from financial firms and Lotte Construction's deposits management asset, it secured the top "AAA" rating. As a result, it obtained funding at a far lower expense than the general lending rate based on its original A0 credit rating.
Lotte Construction expects that issuing this ABS will quickly convert construction payment claims into cash and drastically shorten the existing cycle for recovering construction costs. Typically, at construction sites, money is first spent on construction and it takes from two months to as long as nearly half a year to be reimbursed, but the business sites participating in this asset securitization can recover cash immediately upon the expenditure of construction costs. Through these measures, Lotte Construction expects to achieve early recovery of construction funds totaling about 770 billion won by the first quarter of 2027.
A Lotte Construction official said, "The successful second issuance of AAA-rated ABS not only reconfirmed market trust in Lotte Construction, but is also significant in that it established a sustainable and standardized funding framework," adding, "We will build a solid financial structure that meets market trust through thorough cash flow management and profitability-centered management."