E-Land in Crisis

Korean rating companies are lowering credit rating of E-Land affiliates.
Korean rating companies are lowering credit rating of E-Land affiliates.

 

Korea Investors Service remarked on March 31 that it was monitoring the liquidity response, result of the IPO of E-Land Retail and profitability of E-Land Group’s three corporations in China. Late last month, Korea Investors Service lowered the credit rating of the commercial paper and electronic short-term bond of E-Land World from BBB / negative (A3) to BBB- / negative (A3-) and that of the commercial paper and electronic short-term bond of E-Land Retail from A3 to A3-.

Korea Ratings has asked E-Land Group to submit data to lower its credit rating, too. Once the company submits its data such as debt repayment plans, Korea Ratings is going to examine it and lower its credit rating early this month.

Their credit rating adjustment is because the IPO of E-Land Retail has been deferred indefinitely. Earlier, E-Land Group was planning to carry out the IPO of the company in the first quarter of this year to finance itself and lower its debt ratio to below 200%. However, this plan has been put on hold since E-Land Park’s back pay issue emerged late last year and the Korea Exchange halted its pre-listing examination. The Korea Exchange is planning to resume the examination after data is provided by the company.

Under the circumstances, liquidity risks of E-Land Group are on the rise. “E-Land Group’s operating cash flow has deteriorated since late 2015 along with the loan structures and financial conditions of its major subsidiaries,” Korea Ratings explained, adding, “Its borrowings from the non-banking sector significantly increased last year and the loans that should be repaid by June this year amount to 613.3 billion won (US$548 million).”

NICE Investors Service as well as Korea Investors Service and Korea Ratings is looking to lower its credit rating. Then, the liquidity crisis of E-Land Group is likely to accelerate. “It should be checked when E-Land Retail can go public and whether the liquidity crisis can be resolved based on sufficient cash inflow,” one of them mentioned, pointing out, “Sufficient cash might not be available due to the discounted value of the company even if E-Land Retail does go public.”

 

 

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