E-Mart will not request Ba1 rating withdrawal

By Kim Jae-heun

E-Mart CEO Lee Gap-su

E-Mart will not request Moody's Investors Service withdraw its Ba1 corporate family rating (CFR). “We've not heard anything about E-Mart requesting us to withdraw their CFR and even if they did, we couldn't speak about it before a public disclosure,” a Moody's official said.

An E-Mart official also said the company has no plan to request the credit rating's withdrawal. “We are not reviewing the option to raise objection to Moody's credit rating internally and we have no plan to do so in the future,” an E-mart official said.

Last month, Moody's assigned a Ba1 CFR to E-Mart and withdrew its Baa3 issuer rating. It also maintained its negative outlook. A Ba1 rating is considered non-investment grade.

Yoo Wan-hee, a Moody's Vice President and Senior Credit Officer, said the rating change was driven by a significant weakening in E-Mart's profitability and financial leverage last year. The credit officer added he predicts such factors will not improve in the next two years as E-Mart faces ongoing challenges in its main supermarket business and as its capital spending remains elevated.

Expectations were that E-Mart would ask Moody's to withdraw its downgraded rating following Lotte Shopping's request on Wednesday.

On Jan. 21, Moody's downgraded its outlook for the country's leading retailor by revenue to negative from stable.

Although the credit rating agency retained Lotte Shopping's CFR to Baa3, which is a notch higher than Ba1, Moody's said that the retail giant was facing worsening profitability and financial structures due to consumer changes in purchasing methods.

Lotte Shopping said it requested the withdrawal of the new rating because it has no plan to borrow US dollars. However, industry sources say that is not the only reason.

Lotte Shopping will hold its general meeting of shareholders next Friday and it did not want Moody's negative outlook on its business to be talked about then.

Recently, the National Pension Service (NPS) changed its investment purpose for Lotte Shopping from “simple” to “standard.”

NPS currently holds 6.1 percent of shares for the retail giant and with the “standard investment” status, it can exercise its influence on the company ― such as pushing it to increase dividends and improve their corporate governance system.

NPS is predicted to take action to increase dividends but the move is unwelcome by Lotte Shopping's management as its performance has been very poor in the last few years. It decided to close down over 200 supermarkets across the nation that were not making a profit.

It is currently seeking to rebound with the launch of its new combined online platform “Lotte ON” but this too has delayed opening until the end of April.

Lotte Shopping's stock price has plunged by 35.9 percent from last month and ended up at 70,000 won Wednesday, the lowest in history.