Lotte Group secures $3.8 bn funding from four major Korean banks

Lotte Group announced on Friday that it has signed a financial support agreement worth 5 trillion won ($3.8 billion) with four major South Korean banks, including KB Kookmin Bank, Shinhan Bank, Woori Bank and Hana Bank.

This move is interpreted as an attempt to secure financial resources for future strategic projects while dispelling concerns over a financial crunch caused by Lotte Engineering & Construction last year.

Lotte Engineering & Construction has received a total of $1.1 billion from major affiliates of Lotte Group since October last year.

As the financial burden on the entire group increased in the process, the nation's top three credit rating agencies warned late last year that they could lower the credit rate of major Lotte Group affiliates such as Lotte Chemical Corp. and Lotte Shopping Co.

The agreement aims to secure investment funds for future core businesses such as secondary battery materials, hydrogen and ammonia, recycling and carbon reduction and biohealth. Lotte Group will receive financial support of $3.8 billion over the next five years.

Six group companies including Lotte Corp., Lotte Chemical Corp., Lotte Fine Chemical Co., Lotte Aluminum, Lotte Energy Materials Co. and Lotte Biologics participated in the agreement.

Lotte Corp. has officially formalized four businesses including health and wellness, mobility, sustainability and new life platforms as new growth drivers, and plans to actively promote future core businesses with the agreement.

In particular, the agreement is expected to improve the market's confidence in Lotte Group by securing stable investment funds.

Lotte's chemical group plans to produce 1.2 million tons of clean hydrogen and increase the scale of eco-friendly recycling materials to over 1 million tons by 2030.

Lotte Biologics plans to invest 3.7 trillion won ($2.8 billion) in Incheon's Songdo by 2030 to build a mega plant capable of producing 360,000 liters of antibody drugs.

The four major banks stated that they plan to pursue financial support for fostering national growth and that the agreement will be an opportunity for companies and financial institutions to share their visions for future businesses and create mutual synergy.

According to Nice Investors Service, a Korean credit rating agency, net borrowing by 17 major Lotte Group affiliates stood at $21.2 billion as of the end of September last year, up 20.5% from $17.6 billion a year ago.

Write to Hun-Hyoung Ha at hhh@hankyung.com