Lotte E&C to issue its first hybrid securities

(Yonhap)

South Korea’s Lotte Engineering & Construction Co. (Lotte E&C) will issue hybrid securities for the first time to actively secure funds amid rising external uncertainties.

According to the Financial Supervisory Service on Thursday, Lotte E&C disclosed that it will issue 700 billion won ($478.7 million) worth of hybrid securities.

Lotte E&C held a board meeting on November 21 and approved the issuance as part of efforts to strengthen its capital base.

Hotel Lotte Co. and Lotte Property & Development Co. will each provide funding-support agreements for the hybrid securities.

The issuance will be carried out in two tranches - 350 billion won on December 29 and another 350 billion won on January 29, 2026 – with a coupon rate of 5.8 percent.

Hybrid securities carry an effective maturity of 30 years, making them eligible to be recognized as capital when issued.

With the issuance, Lotte E&C’s total capital is expected to expand from 2.8 trillion won to around 3.5 trillion won.

The company’s debt-to-equity ratio on a consolidated basis is projected to improve significantly from 214 percent as of the third quarter to the 170-percent range.

Lotte E&C held 800 billion won in cash and cash equivalents as of the third quarter, and 1.3 trillion won including unused credit lines, a level already sufficient to manage short-term liquidity.

The company also completed construction of Cheongdam LE-EL, a major post-sale apartment construction project, in October. Jamsil LE-EL is scheduled for completion next month, which is expected to generate favorable cash inflows as residents begin to move in.

Lotte E&C has taken measures to enhance its financial stability, such as extending the maturity profile of its borrowings.

It is also pushing to restructure its business portfolio toward selective bidding and profitability-focused projects.

Lotte E&C expects its profitability to improve more substantially starting next year, when revenue from new projects begins to be fully reflected.

“This issuance has been under review since the first half of this year as a preemptive measure against future market volatility,” said a Lotte E&C official. “We will strengthen our liquidity resilience significantly by lengthening our funding structure and improving financial indicators.”