By Park Si-soo
E-Land, a mid-tier fashion and restaurant company, is wrestling with snowballing debt, which experts say has reached a risky level.
Despite the warning, the company is holding onto an expansion strategy through mergers and acquisitions, raising the possibility that the situation could get worse.
Adding to its woes is that its overseas expansion, powered by bank loans, is focused on China and surrounding nations that are being directly hit by China's economic slowdown.
The firm's decline in this region could deal a critical blow to its bottom line and the fallout could shake its domestic business, experts said. They said one viable and efficient solution may be listing its major affiliates.
According to the Financial Supervisory Service, E-Land World, the group's holding company, had 4.57 trillion won ($3.93 billion) in debt as of Oct. 8, up 13.9 percent or 636 billion won from the end of last year. Its debt-to-capital ratio has surged to 330 percent during the period.
More than half of it must be repaid in five years. According to data from the Korea Investors Service (KIS), E-Land World is obliged to return 1.2214 trillion won this year, 777.9 billion won in 2016, 311.9 billion won in 2017, 110.1 billion won in 2018 and 24.5 billion won in 2019.
"I'm worried about the massive return that should be made within one year," said Ryu Seung-hyup, a KIS analyst. "I don't think E-Land World has sufficient cash reserves to deal with the situation properly. The company should come up with ways to recover its financial health and make repayment on schedule, or it will face bigger trouble."
The company has been aggressive in leveraged buyouts of foreign brands and expansion into China and neighboring countries in recent years.
But many of the brands newly added to its business lineup are showing a lower than expected performance, undercutting the company's profitability and financial health.
Analysts said the firm's reckless expansion in China could turn into a time bomb.
The company runs nearly 7,000 restaurants, fashion shops and other retail stores across China. Powered by the expansion, E-Land generated 3 trillion won in sales last year, up from 1.6 trillion won in 2011. But signs abound that the company is being hit by China's economic slowdown.
E-Land World received 91.7 billion won from its Chinese units during the first half of last year, but this fell to 71.9 billion won during the same period of this year.
"E-Land should take action before it's too late," an analyst said.
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Park Sung-su |
Despite the warning, the company is holding onto an expansion strategy through mergers and acquisitions, raising the possibility that the situation could get worse.
Adding to its woes is that its overseas expansion, powered by bank loans, is focused on China and surrounding nations that are being directly hit by China's economic slowdown.
The firm's decline in this region could deal a critical blow to its bottom line and the fallout could shake its domestic business, experts said. They said one viable and efficient solution may be listing its major affiliates.
According to the Financial Supervisory Service, E-Land World, the group's holding company, had 4.57 trillion won ($3.93 billion) in debt as of Oct. 8, up 13.9 percent or 636 billion won from the end of last year. Its debt-to-capital ratio has surged to 330 percent during the period.
More than half of it must be repaid in five years. According to data from the Korea Investors Service (KIS), E-Land World is obliged to return 1.2214 trillion won this year, 777.9 billion won in 2016, 311.9 billion won in 2017, 110.1 billion won in 2018 and 24.5 billion won in 2019.
"I'm worried about the massive return that should be made within one year," said Ryu Seung-hyup, a KIS analyst. "I don't think E-Land World has sufficient cash reserves to deal with the situation properly. The company should come up with ways to recover its financial health and make repayment on schedule, or it will face bigger trouble."
The company has been aggressive in leveraged buyouts of foreign brands and expansion into China and neighboring countries in recent years.
But many of the brands newly added to its business lineup are showing a lower than expected performance, undercutting the company's profitability and financial health.
Analysts said the firm's reckless expansion in China could turn into a time bomb.
The company runs nearly 7,000 restaurants, fashion shops and other retail stores across China. Powered by the expansion, E-Land generated 3 trillion won in sales last year, up from 1.6 trillion won in 2011. But signs abound that the company is being hit by China's economic slowdown.
E-Land World received 91.7 billion won from its Chinese units during the first half of last year, but this fell to 71.9 billion won during the same period of this year.
"E-Land should take action before it's too late," an analyst said.
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