Loan of 451.7B KRW to PT LOTTE Chemical Indonesia: Supporting Loss-Making Subsidiary's Liquidity and Impact on Shareholder Value
LOTTE CHEMICAL has decided to provide a loan of approximately 451.7 billion KRW (USD 300 million) to its subsidiary PT LOTTE Chemical Indonesia (LCI).
The loan is intended for repaying LCI's ECA facility principal and interest and for proactive liquidity management, with an interest rate of SOFR 1-year + 1.45% and maturity on December 20, 2036 (5-year grace period followed by 6-year installment repayment).
LCI recorded a net loss of approximately 457.4 billion KRW in 2025, and its total equity is about 1.7 trillion KRW, meaning the loan amount (451.7 billion KRW) accounts for about 26% of its equity, raising repayment concerns.
The loan represents 2.57% of LOTTE CHEMICAL's equity (approx. 17.6 trillion KRW), limiting direct impact on financial health, but the subsidiary's risk could pressure consolidated earnings.
[AI Summary]LOTTE CHEMICAL's loan of 451.7 billion KRW to its loss-making subsidiary supports liquidity, but LCI's persistent losses and high debt levels create uncertainty in repayment, posing a risk factor for investors. While the loan is modest relative to the parent's equity (2.57%), potential indirect losses from collateral provisioning should be monitored if the subsidiary's financials worsen.