[Alpha Biz=(Chicago) Reporter Kim Jisun] Regarding Lotte Engineering & Construction, which recently raised concerns over contingent liabilities in real estate project financing (PF), Nice Credit Ratings said, "The amount of contingent debt has decreased, but it is still at a higher level than equity capital."

According to a report published by Nice Credit Rating on the 17th, Lotte Engineering & Construction's PF contingent debt stood at 5.4 trillion won at the end of 2023, down about 1.4 trillion won from 6.8 trillion won at the end of 2022.

Nice Credit Ratings explained that this is the result of the repayment of PF loans through the sale price and the conversion of bridge loans from some workplaces to BonPF amid restrictions on new orders.

However, Nice Credit Rating assessed that Lotte Engineering & Construction's PF contingent debt is still high compared to its equity capital of 2.7 trillion won as of the end of September 2023.

According to Nice Credit Rating, the PF contingent debt of Lotte Engineering & Construction's relatively high-risk "unstocked and low-sale rate businesses related to subcontracting projects" amounts to 3.3 trillion won. In particular, the proportion of the contingent liabilities in metropolitan and provincial areas also exceeds 50%.

In response, Nice Credit Ratings pointed out that it is necessary to respond to the KRW 1.5 trillion Meritz Financial Group fund to reduce the risk of refinancing.

In particular, with the expiration of the PF contingent debt of about KRW 4 trillion in the first quarter of this year, it is predicted that how much contingent debt will be reduced through the transition to the main PF this year will play an important role in Lotte E&C's credit rating in the future.

 

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