Including 13 Lotte Super stores, Lotte Mart had been ready to wash its hands of 113 locations in China since September of this year, after finding it difficult to overcome the local backlash stemming from a geopolitical standoff between China and South Korea. (Image: Yonhap)
SEOUL, Dec. 13 (Korea Bizwire) – As it stands, the likelihood of Lotte Mart’s China operations being sold by the end of the year appears to be low.
Including 13 Lotte Super stores, Lotte Mart had been ready to wash its hands of 113 locations in China since September of this year, after finding it difficult to overcome the local backlash stemming from a geopolitical standoff between China and South Korea.
With relations between the neighboring nations having improved recently, it was expected that the South Korean retailer would be able to dispose of its assets in a speedy manner, but the political climate at the moment indicates that such hopes were premature.
A quick resolution is a matter of hundreds of millions of dollars for Lotte Mart, which injected $300 million in emergency funds into its Chinese operations on August 31, the second such cash infusion it has made so far. According to Lotte Group, the funds will run out by the end of January.
Approximately $210 million has been used to pay back loans taken out from a Chinese financial services firm, and the remainder ($90 million, 100 billion won) is being spent on day-to-day operations to the tune of 20 billion won per month.
Though business operations have been halted, Chinese law requires employers to maintain employees’ monthly salaries at up to 70 to 80 percent. (Image: Yonhap)
Though business operations have been halted, Chinese law requires employers to maintain employees’ monthly salaries at up to 70 to 80 percent.
As such, about 30 to 40 billion won are all that’s left of the $300 million emergency fund (340 billion won).
Despite entering into discussions with a number of potential buyers from China, Taiwan and Thailand, sales agent Goldman Sachs has been unable to close a deal after signs of political tension have made negotiations more difficult.
Despite the partial lifting of the ban on South Korean products in late October, Lotte Mart seems to remain in the Chinese government’s crosshairs.
Lina Jang (linajang@koreabizwire.com)
