VIP Asset Management on the 9th publicly demanded the withdrawal of LOTTE Rental's third-party allocation capital increase. They argued that LOTTE Rental lowered the purchase price of shares held by its largest shareholder, Affinity Partners, causing harm to general shareholders.
VIP Asset Management noted that through the capital increase, Affinity expanded its equity ratio to 63.5% of the existing contract, reducing the average purchase price by approximately 16%. They criticized that the major shareholder created an unusual structure by selling equity at a high price while the major shareholder's board of directors allocated additional equity at a discount to the buyer, thus lowering the purchase price.
LOTTE Rental announced in February that it had sold 56.17% of equity held by Hotel LOTTE to Affinity at 70,115 won per share and issued a large number of new shares at 29,180 won per share in a third-party allocation capital increase. Although the share sale price was set higher than the then stock price with a management premium, the actual purchase price for Affinity's equity is significantly lower when considering the capital increase. VIP Asset Management is of the position that this capital increase unilaterally benefits Affinity and infringes upon the interests of general shareholders.
LOTTE Rental maintains that the capital increase was an unavoidable means of raising capital. They stated that they had no choice but to conduct the capital increase to address the expiration of benefits under the convertible bond management contract due to the completion of the transaction. When the stock transaction involving the change of major shareholders is completed, the company typically has to respond to calls for early redemption of bonds within about 1.5 to 2 months from the date of transaction completion.
In response to these claims, VIP Asset Management rebutted that LOTTE Rental has a stable financial structure. According to VIP Asset Management, LOTTE Rental has a debt ratio of 377%, the lowest in the industry, and is expected to have operating cash flow of over 450 billion won.
VIP Asset Management protested multiple times through private correspondence with LOTTE Rental, but as the capital increase seemed likely to proceed, they publicly voiced their opposition.