Lotte Corporation Responds to Credit Rating Downgrade : “Uncertainty Resolved… Full Commitment to Improving Financial Soundness”

[Korea Financial Times, Park seulgi] South Korea’s three major credit rating agencies downgraded the credit rating of Lotte Chemical, resulting in a simultaneous downgrade for the holding company, Lotte Corporation. This marks the second consecutive year of downgrades, following last year’s adjustment, due to the prolonged slump in the petrochemical sector. However, the market impact of the latest rating changes is expected to be limited, as Lotte has already been raising funds at the downgraded level since the outlook was revised to “Negative” in June last year. Lotte Corporation plans to use this credit event as an opportunity to accelerate financial improvement initiatives.

According to industry sources on July 1, Korea Investors Service, Korea Ratings, and NICE Investors Service downgraded Lotte Chemical’s credit rating on June 30, citing operating losses, and simultaneously lowered Lotte Corporation’s rating as well.

Holding Company Downgraded in Tandem with Chemical Unit’s Troubles

Korea Ratings downgraded Lotte Chemical’s corporate credit rating from AA (Negative) to AA- (Stable), and Lotte Corporation’s unsecured bond and commercial paper ratings from AA- (Negative) to A+ (Stable) and from A1 to A2+, respectively.
Korea Investors Service also downgraded Lotte Chemical and Lotte Corporation’s unsecured bond ratings from AA (Negative) to AA- (Stable) and from AA- to A+ (Stable), respectively. NICE Investors Service lowered Lotte Chemical’s long-term credit rating from AA (Negative) to AA- (Stable) and Lotte Corporation’s long- and short-term ratings from AA- (Negative) to A+ (Stable) and from A1 to A2+.

The agencies explained that Lotte Corporation’s consolidated credit rating is calculated as a weighted average of the standalone credit profiles of its core subsidiaries: Lotte Shopping, Lotte Chemical, Lotte Wellfood, and Lotte Chilsung Beverage. The downgrade of Lotte Chemical, which carries a high weighting, directly affected the group’s overall rating.

NICE Investors Service commented, “Lotte Chemical accounts for 43% of Lotte Corporation’s consolidated assets, 49% of sales, and 34% of total debt on a three-year average, making its credit profile a critical factor in the holding company’s overall rating.”

Lotte Chemical and Lotte Corporation both experienced downgrades last year as well, with Lotte Chemical’s unsecured bond rating dropping from AA+ (Negative) to AA (Stable) and Lotte Corporation’s from AA (Negative) to AA- (Stable). The main reason in both years was Lotte Chemical’s weak performance, which again dragged down the holding company’s rating.

Lotte Corporation’s Restructuring Across All Business Sectors

Credit rating agencies noted that for Lotte Corporation’s rating to recover, it will need to strengthen its own financial structure and see improved credit profiles at key subsidiaries such as Lotte Chemical and Lotte Shopping.

Since last year, Lotte Corporation has focused on securing financial soundness by divesting non-core businesses and assets across the group.

At the 2025 H1 Value Creation Meeting, Chairman Shin Dong-bin emphasized, “In difficult times, we must overcome challenges by efficiently utilizing the group’s assets through selection and concentration.” The group has since accelerated its efficiency drive.

Lotte Chemical secured about KRW 97.9 billion this year by selling its entire 75.01% stake in its Pakistan-based PTA subsidiary, LCPL. In March, it sold its 4.9% stake in the Japanese company Resonac for KRW 275 billion, earning a total profit of about KRW 80 billion including dividends. The company also raised about KRW 1.3 trillion through price return swap (PRS) contracts on shares in its Indonesian and U.S. subsidiaries. Lotte Chemical liquidated its Malaysian synthetic rubber subsidiary, LUSR, and sold its water treatment membrane plant last month.

These asset-light and restructuring efforts at Lotte Chemical are expected to positively impact Lotte Corporation’s credit profile. In the first quarter of this year, Lotte Chemical posted an operating loss of KRW 126.6 billion, but the loss narrowed by more than KRW 100 billion from the previous quarter.

Elsewhere in the group, Lotte Wellfood sold its Jeungpyeong plant and Korea Seven’s ATM business in February. In March, Hotel Lotte and Busan Lotte Hotel signed a contract to sell a 56.2% stake in Lotte Rental to Affinity Equity Partners for KRW 1.58 trillion. Lotte Shopping sold inefficient assets such as the Lotte Mart Suwon Yeongtong branch and Lotte Super Yeoui branch last year, while Hotel Lotte disposed of the L7 Gangnam by Lotte hotel for about KRW 330 billion. Last month, Lotte Corporation sold 5% of its treasury shares to Lotte Property & Development for KRW 145 billion to improve its financial structure.

While the rating downgrade will inevitably raise funding costs, the impact is expected to be limited given the current trend of lower benchmark interest rates. Lotte Corporation stated, “We have over KRW 1 trillion in immediately available cash and credit lines, so there are no liquidity concerns.”

Park seulgi (seulgi@fntimes.com)