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Lotte Chemical’s Daesan plant. (Photo: Lotte Chemical) |
[Alpha Biz= Kim Jisun] Seoul, South Korea — Lotte and HD Hyundai are reviewing a multi-hundred-billion-won capital increase for their joint venture established to consolidate naphtha cracking center (NCC) operations, signaling that major shareholders are preparing their own self-rescue measures while seeking financial support from creditors.
According to industry sources on December 3, Lotte Chemical and HD Hyundai Oilbank have submitted a self-help plan—including a capital increase—to their lead creditor, the Korea Development Bank (KDB). Although the exact size has not been finalized, the two companies are expected to contribute KRW 400 billion each, for a total of approximately KRW 800 billion.
Lotte Chemical plans to spin off its NCC division and merge it into HD Hyundai Chemical, the existing joint venture owned 40% by Lotte Chemical and 60% by HD Hyundai Oilbank. After the merger, the companies intend to adjust their holdings so that each will own 50% of the merged entity.
HD Hyundai Chemical, which recorded a debt-to-equity ratio of 372% and a KRW 391.8 billion loss in the third quarter, requires substantial additional funding to operate the consolidated NCC facilities in the Daesan region. This led the company to request financial assistance from KDB, while both JV shareholders agreed to share the financial burden through a proposed capital injection.
Following the merger, the companies are considering reducing ethylene production by several hundred thousand tons as part of capacity optimization efforts. Because the NCC business unit at Lotte Chemical will be carved out as part of the transaction, employees from that division are expected to transfer to the joint venture as well.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
