Lotte Rental Returns to the Public Bond Market; Change in Controlling Shareholder a Potential “Early Redemption Trigger” [fn Market Watch]

[Financial News] Lotte Rental faces mounting refinancing pressure, with marketable debt totaling KRW 1.13 trillion—including corporate bonds, commercial paper (CP) and short-term electronic bonds—coming due by July next year. The potential for existing bondholders to seek early redemption following a change in controlling shareholder has added to the challenge, making liquidity management a key priority. To meet these funding needs, Lotte Rental plans to issue up to KRW 200 billion in publicly offered bonds.
According to investment banking (IB) industry sources on the 14th, Lotte Rental will conduct a bookbuilding exercise on the 21st for a KRW 150 billion corporate bond issue. The bonds will be offered in 18-month, two-year and three-year maturities, with the company planning to increase the size to as much as KRW 200 billion if demand is strong. The target pricing range is 30 basis points below to 30 basis points above the average yield compiled by individual private bond pricing firms (the Minpyeong rate), with 1 bp equal to 0.01 percentage points.
NH Investment & Securities, KB Securities, Samsung Securities Co., Ltd., Kiwoom Securities, Shinhan Investment & Securities, Mirae Asset Securities, Korea Investment & Securities and Hyundai Motor Securities are serving as joint lead managers.
The bonds are scheduled to be issued on the 29th of this month. Lotte Rental is rated A+. This will be its first publicly offered bond issuance in about 15 months, following an issue of KRW 191 billion on July 3 last year.
Lotte Rental’s return to the corporate bond market is driven by substantial refinancing needs. Corporate bonds totaling KRW 500 billion will mature between January and July next year. In addition, its current outstanding balance of CP and short-term electronic bonds, about KRW 630 billion, will come due within the next six months. In total, the company faces KRW 1.13 trillion in repayments or refinancing needs through July next year across corporate bonds and short-term marketable debt.
The possibility that bondholders may seek early redemption following a change in controlling shareholder is a particular source of uncertainty for maturity management. In August, Lotte Group signed an agreement to sell its 61.17% stake in Lotte Rental to global private equity firm Texas Pacific Group (TPG) for approximately KRW 1.3105 trillion. The Fair Trade Commission approved the business combination in September, and follow-up procedures to transfer management control are underway.
According to NICE Investors Service, publicly offered bonds issued by Lotte Rental include a special early-redemption provision linked to a change-of-control clause. The bonds in question totaled KRW 961 billion as of the end of March. If the change in controlling shareholder satisfies the contractual conditions and investors seek early redemption, cash outflows could occur outside the original maturity schedule.
The challenge is that it is difficult to predict the scale and timing of actual early-redemption requests. The triggering of an early-redemption right does not mean investors will all seek full repayment at once, but Lotte Rental must still secure enough liquidity to meet redemption requests before maturity.
An IB industry source explained, “Even in similar cases in the past, investors did not seek full repayment simply because an early-redemption right had been triggered. Since interest rates at the time bonds were purchased differ from current market rates, investors naturally have different incentives to request repayment.”
The source added, “It is difficult to predict exactly when requests for repayment will come in or how much they will amount to. I understand that Lotte Rental, too, is estimating the expected repayment amount to some extent based on each bond’s issuance rate and maturity, as well as similar cases in the past.”

[email protected] Kim Hyun-jung Reporter