Lotte E&C has raised 300 billion won in funding through the issuance of asset-backed securities (ABS) using construction receivables.
Lotte E&C said Monday it issued 300 billion won in AAA-rated ABS backed by construction receivables from housing projects nearing completion and construction projects of group affiliates. The securitized notes consisted of 150 billion won in one-year maturities and 150 billion won in maturities of one year and three months. The underwriting group included KB Securities, Hana Securities, Kiwoom Securities, Samsung Securities, and Korea Investment & Securities.
This issuance is the second following the first construction receivables ABS conducted in May. Based on the previously proven securitization structure, Lotte E&C secured investment demand in the follow-up issuance, earning recognition for reaffirming market confidence in its self-developed ABS structure.
This ABS is characterized by strengthening both the composition of underlying assets and credit enhancement. In addition to construction receivables from housing projects nearing completion, construction receivables generated from group affiliate projects were also incorporated into the underlying assets, enhancing structural stability. Combined with credit provision from financial institutions and Lotte E&C's deposit management, the securities were issued at AAA, the highest credit rating.
Lotte E&C explained that this issuance allows it to raise funds at a lower cost than existing borrowing. While Lotte E&C's own credit rating stands at the A0 level, this ABS was issued at AAA, offering expected cost savings in terms of funding rates.
An improvement in cash flow is also expected as construction receivables are converted into cash early. Typically, at construction sites, construction costs are spent first and funds are recovered an average of two to six months later, but the projects incorporated into this ABS have a structure that allows early fund recovery simultaneously with construction cost expenditure.
Lotte E&C expects this measure to enable financial cost reductions and stable cash flow. The company anticipates that this ABS issuance will generate an early recovery effect of approximately 770 billion won in construction costs through the first quarter of 2027.
