E-Land World Faces Mandatory Repayment of 150 Billion Won if Credit Rating Falls Two Notches; Liquidity Burden in Focus [fn Market Watch]

[Financial News] E-Land World, the business holding company of E-Land Group, issued 150 billion won in privately placed corporate bonds with a provision requiring mandatory repayment if its credit rating falls by two notches. With total borrowings exceeding 5 trillion won and identified bond issues maturing next year amounting to 126 billion won, maintaining its creditworthiness is becoming increasingly important.
On the 28th, investment banking (IB) industry sources said E-Land World issued 150 billion won in privately placed bonds on the 26th. The bonds mature on October 26, 2028, and have a two-year term. The coupon rate is around 6.55% per year.
A key feature of the bonds is a mandatory repayment clause linked to a credit-rating downgrade. E-Land World’s current corporate bond rating is BBB, with a “Stable” outlook. A two-notch downgrade from its current rating would take it through BBB- to BB+. BB+ is a speculative grade, below investment grade.
In other words, a credit-rating downgrade could make it harder for the company to raise funds. E-Land World had particular difficulty attracting investor demand in the public bond market last August. It held a bookbuilding to raise 20 billion won through one-year public corporate bonds, but received orders for only 18 billion won, leaving 2 billion won unsold.
The final yield was set at 7.341% per year. This was 30 basis points (1 bp = 0.01 percentage point) above the yields assessed by individual private bond pricing agencies, at the top of the indicative yield range.
The volume of corporate bonds issued this year has also been substantial. From February through this month, E-Land World has issued six bond offerings totaling 336 billion won. The 150 billion won in privately placed bonds issued this time accounts for about 44.6% of the total.
The company has also used various issuance structures. After issuing ordinary corporate bonds worth 41 billion won in February and 50 billion won in April, it issued privately placed bonds worth 50 billion won in May and 25 billion won in June for inclusion in primary collateralized bond obligations (P-CBOs). It issued 20 billion won in public bonds in August and added 150 billion won in privately placed bonds this month. Its maturity profile is also short-term: a total of 126 billion won in E-Land World corporate bonds come due next year, with 106 billion won concentrated in the first half.
E-Land World also faces a considerable borrowing burden. At the end of June this year, consolidated total borrowings stood at 5.0708 trillion won, up 70.5 billion won from the end of last year. Short-term borrowings accounted for 3.0305 trillion won, or about 59.8% of the total. The debt ratio and borrowing dependence ratio stood at 178.3% and 46.6%, respectively.
However, E-Land World has a stable operating base in its core businesses. New Balance and SPAO in its fashion division maintain solid market positions, while its diversified portfolio spanning retail, food service and hotels also supports its creditworthiness.
Asset monetization to improve its financial structure is also under way. This year, E-Land World has been shedding non-core assets, including by selling hotels in China and its FOLDER footwear select-shop business. One IB industry source said, “A key factor in maintaining the company’s creditworthiness will be how much it can reduce its borrowing burden through further asset sales and improvements in operating cash flow.”


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