Goldman Sachs on track to redeem option for Coupang loan

By Baek Byung-yeul

Undeterred by a fire that recently engulfed a warehouse owned by Coupang, investors are snapping up Coupang stocks as the e-commerce company appeared to refinance loans used to build the warehouse at a lower interest rate.

According to investment banking sources on Wednesday, Goldman Sachs requested Coupang to cancel investments and seek around 300 billion won ($266.3 million) in refunds.

Back in 2017, Goldman Sachs Special Situations Group (Goldman Sachs SSG) provided Coupang with a five-year loan that used the inventory in its two warehouses as “collateral,” as well. Coupang was said to have been paying an average annual interest rate of 5.5 percent on the loan. However, a fire broke out at the warehouse on June 17 that killed a 52-year-old firefighter.

The global investment bank is reportedly examining whether the fire at the warehouse could become classified as a default, which means that the lender can demand repayment of the loan from the borrower. If it is determined that its collateral, the Deokpyeong warehouse, has burned down due to the fire, Goldman Sachs will be able to collect the money it loaned to Coupang.

Many investors believe that Coupang's fiscal status could improve if the company is able to renew its loan contract at a lower interest rate.

Industry watchers said that Coupang will be able to secure financing at an interest rate of less than 2 percent, as the company has grown into one of the largest e-commerce companies in Korea.

Backed by the Japanese conglomerate, SoftBank, Coupang has emerged as the most powerful e-commerce company in Korea. Coupang generated sales of around 1.92 trillion won in 2016, but its sales jumped more than six times to around 13.25 trillion won in 2020.

Thanks to such sentiment, Coupang, which debuted on the New York Stock Exchange in February, saw its stock price rise 10.22 percent to end at $42.16 on June 29. A Coupang official said that the company has no comment on the issue.

Coupang has become one of the most popular online shopping platforms here, mainly because of its overnight delivery service called “Rocket Delivery.” By operating warehouses across the country, the company stocks up on items it purchased directly from sellers and delivers them to buyers.

In addition to its e-commerce business, Coupang is also trying to expand its operations into the live commerce business, which refers to an online e-commerce method where retailers sell products through real-time video. On Coupang's mobile app platform, buyers can communicate with each other or ask show hosts questions about items on live broadcasts.