- Published 2026.11.06 10:14
Launches tender offer for remaining stake worth 831.7 billion won
150 billion won public bond draws 644 billion won in orders
High dividend potential after full subsidiary conversion is mid-to-long term burden
Lotte Rental, whose largest shareholder has changed to a global private equity fund and which has begun the process of delisting from the KOSPI market, has raised large-scale funds in the bond market. Investors appear to have placed more trust in the industry leader's solid cash generation than in credit risk concerns stemming from the change in control and the transition to an unlisted company.
According to the Financial Supervisory Service's DART electronic disclosure system on Nov. 6, Lexicon Korea Holdco, a special purpose company established by global private equity firm Texas Pacific Group (TPG), began a tender offer for 14,097,325 common shares of Lotte Rental, or a 38.83% stake, at 59,000 won per share. The plan is to invest a total of 831.7 billion won (about $614 million) to buy all remaining shares held by minority shareholders, convert Lotte Rental into a wholly owned subsidiary, and then voluntarily delist the company. TPG had earlier acquired a 61.17% stake held by Lotte Group affiliates for 1.3105 trillion won (about $967 million) on Oct. 30, becoming the largest shareholder.
The process of a large conglomerate affiliate changing to a private equity ownership structure and then being delisted typically acts as a strong negative factor in the bond market. This is because the possibility of financial support from the existing conglomerate group in times of crisis disappears, and once the company becomes unlisted, disclosure obligations are reduced, lowering information accessibility. The fact that private equity funds mainly use leveraged buyouts and may increase dividends or artificially alter the capital structure to recover acquisition costs also threatens creditworthiness.
However, the atmosphere at the site where Lotte Rental issued marketable bonds was different. In the book-building for 150 billion won (about $111 million) worth of unsecured public corporate bonds conducted on Oct. 20, buy orders totaled 644 billion won (about $475 million), more than four times the offering amount. It is noteworthy that institutional investors aggressively bet on long-term bonds despite the high uncertainty of the transition period. The three-year tranche, which was allocated 20 billion won (about $15 million), attracted 199 billion won (about $147 million) in orders, and the interest rate was set 7 bp lower than the individual average yield.
Behind this strong demand is the unwavering fundamental strength of its main business. Lotte Rental is the industry leader with a market share of around 19% based on the number of registered vehicles. Its long-term rental car business generates stable monthly cash inflows. In the third quarter of this year, it posted consolidated revenue of 775.4 billion won (about $572 million) and operating profit of 92.9 billion won (about $69 million), up 2.3% and 4.4%, respectively, from the same period last year. By increasing the proportion of high-margin products such as used-car long-term rentals, it achieved an operating margin of 12.0%.
The clear purpose of the funds raised also eased credit investors' concerns. The rental car business has a high proportion of short-term borrowings because it first secures vehicle assets with debt and then recovers funds through rental fees and used-car sales proceeds. Lotte Rental plans to use the funds raised from this bond issuance to repay 80 billion won (about $59 million) in short-term electronic bonds and 70 billion won (about $52 million) in commercial paper (CP) maturing this month. It preemptively blocked refinancing risk by rolling over short-term debt into mid-to-long term corporate bonds.
However, the financial changes that will come after the delisting is completed are key indicators that bond investors will need to watch. Lexicon Korea Holdco raised 1.336 trillion won (about $986 million) in large-scale acquisition financing from financial institutions in the process of acquiring Lotte Rental. Once the delisting is completed and Lotte Rental becomes a wholly owned subsidiary, Lexicon Korea Holdco could abnormally raise Lotte Rental's dividend payout ratio to cover its massive interest costs. Credit rating agencies are also likely to remove the rating uplift that Lotte Rental enjoyed as a Lotte Group affiliate. Whether Lotte Rental can defend its current credit rating and curb rising borrowing costs based solely on its own fundamentals will determine its mid-to-long term success.
(Dollar figures are approximate, converted automatically at 1,000 won = $0.738, the rate on Nov. 8, 2026.)
※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.
