SEOUL, KOREA - Lotte Shopping will sell its department store and discount outlet properties to secure cash of about 500 billion won. This comes after a sale-and-lease-back deal in August in which the company took in 600 billion won in cash from the sale of department stores and discount stores.

 

According to investment banking sources on November 5, Lotte Shopping has selected Daiwa Securities as an underwriter to a block deal to sell off some of the domestic retail properties. The Korea Post, with a 90 trillion won fund under management, has emerged as a strong contender for the deal. A person close to the transaction said, "It is not yet clear what stores Lotte Shopping will put up for sale but the total price tag would be in the range of 500 billion won. It is likely the Korea Post will acquire all of these stores through an investment fund."

 

Even after the transaction, however, Lotte Shopping will continue to run the stores by paying monthly lease instead of owning them. The retailer will use the proceeds to invest in new projects while paying down debt. Earlier in August, the company had sold seven retail properties to KB Asset Management at 601.7 billion won on condition that it would lease the stores for 20 years. 

 

Analysts figured that this is a move by the company to improve its financial standing. Lotte Shopping has been busy opening new stores in overseas locations such as China, Indonesia, and Vietnam since 2010 while acquiring domestic assets such as GS Department Store, GS Mart, and Hi-Mart. As a result, it saw its debt-to-equity ratio shoot up to 69.3 percent as of the end of June this year from 51.3 percent at the end of 2009. Moody's downgraded the company's credit rating in February this year to "Baa2" from "Baa1."

 

Article provided by The Korea Economic Daily