Photo = Lotte Insurance

 

 

[Alpha Biz= Kim Jisun] Lotte Insurance has hit a significant roadblock in its efforts to raise capital through the issuance of subordinated bonds, following escalating tensions with the Financial Supervisory Service (FSS) over its call option rights.



According to investment banking (IB) sources on May 13, discussions surrounding the private placement of subordinated bonds were abruptly halted after the FSS intervened, preventing the company from exercising its call option. The financial regulator had previously expressed concerns over the company’s early redemption of its subordinated bonds, which would have been triggered despite the company’s solvency ratio (K-ICS) not meeting the required threshold.



Lotte Insurance had been in talks with securities firms to issue private subordinated bonds, which only require a filing with the FSS, as opposed to the public subordinated bond issuance that requires prior approval. The private bond offering had attracted interest from institutional investors before the regulatory conflict escalated.



However, once the FSS prevented the company from exercising the call option, most institutional investors withdrew their interest. A securities industry source commented, “With the regulatory intervention halting the call option exercise, investors have pulled out, effectively killing the private subordinated bond issuance.”



Lotte Insurance had earlier clashed with the FSS over the call option, as the company had planned to proceed with the redemption of the bonds worth 90 billion KRW despite not meeting the solvency requirements. The FSS's objections led to a delay in the redemption, with Lotte Insurance deciding to postpone the call option exercise. The company now intends to complete its capital expansion in the second half of the year and reinitiate the call option plan.



With the private subordinated bond offering now off the table, industry experts suggest that the only viable option for Lotte Insurance may be a rights offering by its largest shareholder, JKL Partners.

 

 

 

 

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