Lotte Tour has faced critical financial woes, raising the possibility that the company could be driven out from the nation’s main bourse.
The scenario of Lotte Tour being delisted from the Korea Exchange comes as the 31 trillion won ($28.4 billion) urban development project in Yongsan, Seoul, is on the verge of collapse under dishonored bills.
While the company participated in the largest-ever project as a main investor, its external auditor Daesung Accounting Corp. publicly evaluated Lotte Tour’s financial statements as “disclaimer of opinion” in its assessment.
Under the nation’s accounting standards, the disclaimer of opinion is the most negative view among the four grades given by auditors.
The Korea Exchange, citing the audit report, said it has decided to suspend trading of Lotte Tour shares.
The main bourse is considering launching related procedures to delist Lotte Tour in consultation with the Financial Supervisory Service.
Meanwhile, Lotte Tour filed for court receivership on the same day, seeking a rehabilitation via restructuring under the watch of the court.
Lotte Tour, which invested about 170 billion won in the Yongsan project, is likely to undergo capital erosion from huge losses.
As of December 2012, the tour-oriented company posted a debt-to-equity ratio of 258.7 percent ― 131.4 billion won in debt and 50.8 billion won in equity capital.
In the worst-case scenario, the project failure may result in capital impairment of the state-run rail operator KORAIL and unprecedented class action suits involving dozens of investor companies and thousands of victimized residents.
Dream Hub, a special-purpose company established by KORAIL and 29 private investors to implement the project, announced its default status on March 13, having failed to pay back the 5.9 billion won in interest on its asset-backed commercial paper.
Creditor banks extended the deadline until noon on March 13, in the hope of saving the project, but the developer failed to secure funds.
Though government officials and key shareholders claimed that this did not necessarily mean immediate bankruptcy, the outlook for the faltering project is bleak.
“Dream Hub will first follow the procedure for a corporate revival process,” said a Land Ministry official.
“Bankruptcy is to come afterward, only if the given option turns out to be infeasible.”
For the insurance sector, Samsung Life and Samsung Fire & Marine are estimated to suffer losses of 14 billion won and 4.8 billion won, respectively, if Dream Hub is liquidated.
