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Photo courtesy of Yonhap News |
[Alpha Biz= Kim Eun-mi] Lotte Card is facing heightened rollover risks in the asset-backed securities (ABS) market as concerns grow over a possible business suspension and subsequent credit rating downgrade.
According to industry sources on April 14, Lotte Card provides credit support for approximately KRW 241.8 billion in ABS backed by card receivables linked to SK Incheon Petrochemical. The structure relies on Lotte Card as an intermediary for cash flows, making its creditworthiness a key factor in overall transaction stability.
The ABS is currently rated A2+, reflecting the lower of the credit ratings between the two entities. Market participants warn that a downgrade of Lotte Card could directly lead to a downgrade of the securities.
The risk has intensified after the Financial Supervisory Service issued a preliminary notice of heavy sanctions, including a potential business suspension of up to 4.5 months, following a data breach incident. A final decision is expected after an upcoming review.
If a suspension is imposed, it could limit ABS issuance capacity or disrupt payment flows, potentially affecting SK Incheon Petrochemical’s working capital financing despite its own credit standing.
Lotte Card has also issued around KRW 720 billion in ABS backed by its own receivables, with credit enhancement provided by financial institutions such as KB Kookmin Bank and Kiwoom Securities. In a stress scenario, these institutions may be required to provide liquidity support.
While a full refinancing failure is considered unlikely, rising funding costs due to higher rollover rates remain a key concern for the market.
Alphabiz 김은미 인턴기자(kfootle@alphabiz.co.kr)
