Korea Land and Housing Corp. (LH) celebrated the 6th anniversary on Oct. 1 of the merger between Korea Land Corp. and Korea Housing Corp. The new company has had its share of trouble in adjusting its operation and managing huge debts.
But the company has done more than its share when it comes to building residential homes for lower and middle class people for lease. It has also paid off 12.7 trillion won in debt during the period.
When President Lee Jae-young took over the management of the company in 2013, its debts totaled 105.7 trillion won, making its debt ratio 466 percent, with interest on those debts increasing 10 billion won daily. But in two years and three months since the new CEO’s arrival, the debt was cut to 92.9 trillion won as of Sept. 31, the company said.
Various measures have been employed by the company, including a declaration to freeze its debts, the operation of a debt clock, maximization of the land and housing sales and diversification of operation, among others.
Officials of the company recall that they had to pay back a portion of their salaries to the company and cut their benefit programs in belt-tightening measures. The entire company is focused on marketing and cutting expenses by diversifying its operations, which worked to help reduce the outstanding debt level of the company.
President Lee declared that the debts cannot be reduced unless the company changes how it operates in developing land and building houses for the general public. He declared an emergency situation in the company’s operation to try to put the company back on track.
He introduced a competition system among the different units, such as between the head office units and regional units and reassigned the manpower with worksites as the base. One result was the sale of housing units jumped to 27 trillion won last year for the largest annual sales in the company’s history, and the company’s budget was based on its income to put the company back on track to reduce its debts. The CEO also committed to not issuing bonds to secure funds.
Korea Land and Housing Corp. also allowed in the paths of private construction firms to join public housing projects and lease houses under the joint REITS systems in partnership with private builders. A result was that the company saved some 1.2 trillion won in expenses last year and aims at saving some 2 trillion won this year. The improved management of the company had many benefits, including Standard and Poor’s upgrading its credit rating to AA-, the highest in the company’s history. The company no longer required to pay an extra percentage on the interest rates (2 bp) on its bonds due to a poor credit rating.
Moody's Investors Service says that Korea Land and Housing Corporation's improved operating performance and debt reduction is credit positive, but will have no impact on its Aa3 issuer and senior unsecured ratings or positive outlook.
President Lee was very proud that the company has been able to bring down its debt levels, which many said was not possible. LH will now be able to refocus on its original goals to work for the residential welfare, the revival of municipalities and regional development.
"KLHC's earnings showed a significant year-on-year improvement and its debt levels continued to decline in 1H 2015, primarily owing to its robust land sales performance," says Yoo Wan-hee, a Moody's vice president and senior analyst.
According to KLHC's H1 2015 financial report, the company's consolidated operating profit for the first half of 2015 grew 53 percent year-on-year to 986 billion won from 643 billion won in the first half of 2014.
Also, LH reported its debt declined to 94.8 trillion won at the end of the first half, from 98.6 trillion won at end-2014 and 105.8 trillion won at end-2013. Moody's notes that KLHC's current debt level is about two years ahead of its original target.
_LH 이재영.jpg)
