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[Alpha Biz=(Chicago) Reporter Paul Lee] Lotte Engineering & Construction's real estate project financing (PF) contingent debt, which has preemptively explained liquidity concerns, is still excessive, according to a credit rating agency. Analysts say that support at the group level is urgently needed as the maturity of PF's contingent debt worth 4 trillion won has returned in the first quarter alone.
According to Nice Investors Service on the 19th, Lotte Engineering & Construction's PF contingent debt was 5.4 trillion won as of the end of last year. Although it decreased by 1.4 trillion won from the end of 2022 (6.8 trillion won), it is still higher than its equity capital (2.7 trillion won as of the end of September last year). In particular, PF contingent debt amounts to 3.3 trillion won at relatively high-risk subcontracting-related businesses with low occupancy and sales rates.
Nice Investors Service said, "This year, it is necessary to reduce contingent debt through the start of construction due to normal business progress and the conversion of this PF."
Lotte Group has a good financial stability with a debt ratio of 125.2% and a sequential deposit dependence of 27.3% (excluding financial affiliates), and has cashable assets amounting to 13 trillion won, which is said to have sufficient liquidity responsiveness.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
