Monday, December 16th, 2013
SEOUL, KOREA - Lotte Shopping will secure 1.7 trillion won in cash by selling off its department store and discount outlet assets and lease them back.
According to retail industry sources on December 15, Lotte Shopping is in the final stage of negotiations with a real estate investment trust to be listed on the Singapore Exchange to sell 15 to 17 store assets.
The assets to be sold include four to five Lotte Department Stores in such locations as Ilsan and Pohang and 11 to 12 Lotte Mart stores in Goyang, Gumi, and the like. The company will retain the management control of the stores by taking advantage of the "sale and lease back" deal in which it sells the properties and lease them back for 20 years.
The main reason Lotte Shopping is relying on the sale-and-lease-back deal is to improve its financial standing while increasing its cash holdings for future investment overseas. Since 2010 the company has seen its debt-to-equity ratio skyrocket largely due to the aggressive expansion overseas such as China and Indonesia as well as the domestic acquisitions like GS Department Store and Hi-Mart.
The company's balance of debt as of the end of 2012 rose to 12,125.4 billion won from 5,336.6 billion won at the end of 2009. Its debt-to-equity ratio has increased accordingly to 134.5 percent from 89.2 percent during the same period.