E-Land faces another credit downgrade

By Lee Hyo-sik

E-Land Group is facing another potential credit downgrade as it struggles to get its retail unit listed on the local bourse.

Korea Ratings, one of the country’s three major credit ratings agencies, said Wednesday that it would slash the credit worthiness of E-Land World if the mid-tier fashion-and-retail business group fails to take E-Land Retail public as scheduled.

E-Land World is the group’s holding firm, which has a controlling stake in E-Land Retail and E-Land Park. E-Land Retail owns Kim’s Club and other retail outlets, while E-Land Park operates hotels, restaurants and other leisure-related businesses.

Last December, Korea Investors Service lowered E-Land World’s credit ratings by one notch to BBB- from BBB, citing its deteriorating financial health as a result of snowballing debt.

If Korea Ratings follows suit, it would deal a severe blow to E-Land, headed by Chairman Park Sung-su, which has been scrambling to renew maturing loans and raise new capital over the past few months.

“If E-Land cannot get the shares of E-Land Retail listed on the bourse in March, we will seriously consider cutting the credit worthiness of E-Land units,” a Korea Ratings official said. “There are still lingering concerns about E-Land’s financial health even though it disposed of its casual clothing brand, Teenie Weenie, and several real estate properties to secure cash. We still believe this is not enough for improving the group’s financial soundness.”

E-Land is having a hard time taking E-Land Retail public because of growing concerns over the financial health of its affiliate E-Land Park. The latter has been in the hot seat for not paying 8.4 billion won ($7.4 million) to its 4,400 part-time workers.

Korea Exchange (KRX) recently asked E-Land Group to provide documents concerning E-Land Park’s financial status. The stock market operator said it will decide whether to allow E-Land Retail to go public or not after reviewing the documents, a process that may take months.

Initially, KRX had planned to complete the review process for E-Land Retail in January and get its shares listed as soon as possible.

However, E-Land officials are arguing there is no reason for Korea Ratings to downgrade the group’s credit ratings.

“E-Land has successfully taken a series of self-rescue moves to improve its financial soundness,” a company official said. “We sold Teenie Weenie to Chinese fashion brand, V-GRASS, for 1 trillion won, and disposed of real estate. We will also soon list the shares of E-Land Retail. We are on the right track.”

The official said it is absurd for ratings agencies to downgrade E-Land’s credit assessment, stressing that Korea Ratings should not repeat the same mistake made by Korea Investors Service.