IMM, Lotte to inject another $76 mn in Hanssem at default risk

South Korea’s IMM Private Equity and Lotte Group are set to inject additional 100 billion won ($75.6 million) in Kosdaq-listed Hanssem Co., the largest furniture maker and home furnishing company in the country, according to investment banking sources on Dec. 7. 

IMM PE and Lotte Group jointly bought a 27.7% stake in Hanssem alongside management rights for around 1.5 trillion won in October 2021.

The fund comprised 400 billion won from IMM PE, 300 billion won from Lotte Group affiliates Lotte Shopping Co. and Lotte Himart Co. and a 821 billion won loan from a group of Korean banks and financial services firms, including Shinhan Bank. The quarterly loan-to-value (LTV) was set at 75% to 85%. 

However, the furniture maker saw its LTV surpass 85% this year due to the decline in sales amid the real estate market downturn. The company swung to red in the third quarter, posting 13.6 billion won in operating loss. The July-September revenue was 477.3 billion won, down 10.9% from the same period of the last year.

Hanssem's share rose 0.85% to 47,300 won on Wednesday. The closing price is only 21% of the share price set for the acquisition deal last year.

The lender group initially requested IMM PE for an additional fund of 300 billion won, but agreed with the injection of 100 billion won as the PE firm has already deployed around 20% of its 1.9 trillion won fourth blind pool fund to Hanssem. IMM PE has originally set the maximum deployment to Hanssem at 25% of the blind pool fund.

The PE firm is set to receive commitments from Korean institutional investors and plans to complete the additional investment in early 2023. Lotte is slated to determine the capital injection at Lotte Shopping Co.’s board meeting on Dec. 8.

IMM PE will focus on raising Hanssem’s corporate value, considering a sale of the furniture maker’s headquarters. Once the investment is made, Hanssem will be exempt from LTV testing until June 2024.

Write to Chae-Yeon Kim and Dong-Hun Lee at why29@hankyung.com
Jihyun Kim edited this article.