Korean financial authorities have embarked on credit risk probe on Lotte Group’s Chinese operations amid concerns over losses from expanded retaliatory actions from Chinese authorities over its yield of location for a U.S. missile radar shield system.
According to the Financial Supervisory Service (FSS) on Thursday, Lotte’s Chinese units have liabilities of around 2 trillion won ($1.7 billion) - 1.2 trillion won owed to Korean commercial banks and another 800 billion won to Chinese banks or foreign banks in Korea. The debt ratio is high for construction units.
Although the loans are a manageable size, local authorities will keep a close watch on the possibility of a credit risk, an FSS official said.
Meanwhile, the toll on Lotte business in China is stretching.
As of Wednesday, more than half of 99 Lotte Mart stores have been hit with a one-month suspension. The penalty was mostly related to incompliance with fire and building regulations. If 55 outlets stay closed for a month, loss in sales is estimated at 50 billion won.
“We will interfere to ensure the Lotte companies in China do not run into liquidity squeeze from credit control from lenders,” the official said.
By Chung Seok-woo
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