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Tag: V-GRASS

  • Teenie Weenie deal is a big one

    Teenie Weenie deal is a big one

    The deal with V-Grass represents the biggest cross-border merger and acquisition agreement in Korea’s fashion industry.

    E-Land Group said proceeds from the sale will help the company reduce its debt level to 240 percent by the first quarter from the current level, which is above 300 percent.

    The final price is lower than the previously reported range of 1 trillion won. “After we adjusted our position on the operation of E-Land’s women’s wear unit in China, we finally agreed on the deal,” said a source at E-Land familiar with the deal.

    The company said that since Teenie Weenie’s book value stands at 120 billion won, it would obtain a profit worth 750 billion won through the sale.

    However, it will still own 10 percent of the fashion brand’s shares for three years to “maintain a stable partnership” with the Chinese company. “The reason why E-Land keeps a 10 percent stake is that both companies need to cooperate on production and business and generate synergy after the deal,” E-Land said in a statement.

    The board of directors at V-Grass passed the takeover agenda on Tuesday, and the shareholders are expected to cast a vote on Feb. 10.

    Following the decision, the Chinese retailer is expected to pay the price for sale on Feb. 20.

    The Nanjing-based company captured Chinese consumers’ shifting purchase behaviors in favor of more premium brands. But since the sale price is higher than its market capitalization, the company will pay with debt.

    On E-Land’s end, the sale is its latest effort to restore financial liquidity. The group had sold three properties in Mapo District, western Seoul, and Gangnam District, southern Seoul, last year, a move that brought in 250 billion won.

    The company will push forward to secure cash through sales of other properties. By the first quarter, it will sell 200 billion won worth of real estate and then 500 billion won later this year.

    The fashion group also plans to take E-Land Retail public in a capital-raising effort by the first half of this year, a move that E-Land believes will reduce its debt level to 200 percent.

    E-Land has been accumulating more debt as some of its brands like New Balance have lost traction among young consumers.

    Other analysts believe the group is excessively focused on physical expansion, increasing the number of brick-and-mortar stores even though more are turning to online and mobile shopping.

    Faced with headwinds, E-Land Group companies saw their credit ratings downgraded in December by the Korea Investors Service.

    There are 1,300 Teenie Weenie stores in China. Last year, the brand earned 421.8 billion won in sales while generating 112 billion won in operating profit and 86.3 billion won in net profit.

    V-Grass was established in 1997 and specializes in high-end women’s fashion.

     

  • E-Land refutes credit downgrade

    E-Land refutes credit downgrade

    E-Land Group, headed by Chairman Park Sung-su, is fiercely refuting the Korea Investors Service’s latest credit downgrade of its holding firm, E-Land World, vowing to file a lawsuit against the ratings agency affiliated with the U.S.-based Moody’s.

    Officials at the mid-tier fashion-and-retail business group argued that the ratings agency’s assessment was flawed, calling on the company to retract its decision to cut the credit worthiness of E-Land World, which has a controlling stake in E-Land Retail and E-Land Park.

    E-Land Retail owns Kim’s Club and other retail outlets, while E-Land Park operates hotels, restaurants and other leisure-related businesses.

    On Monday, the Korea Investors Service lowered E-Land World’s credit ratings by one notch to BBB- from BBB, citing its deteriorating financial health as a result of snowballing debt. The agency maintained its negative outlook for the holding firm.

    “We see no improvement for E-Land Group’s financial conditions even though it has implemented self-rescue measures,” a company analyst said. “With E-Land’s struggling retail and fashion businesses, it would be difficult for the company to generate an operating profit. It is uncertain as to whether E-Land would be able to improve its financial health by executing self-rescue plans.”

    E-Land officials were furious over the credit downgrade, pledging to take the ratings agency to court.

    “It is absurd for the Korea Investors Service to cut the credit ratings for E-Land World when it has successfully been improving its financial soundness over the past few months,” an E-Land Group spokesman said. “The agency assessed the holding firm based on the data available in early September. But it should have included what happened in the fourth quarter of 2016. This is what they did wrong.”

    In late September, E-Land, sold its casual clothing brand, Teenie Weenie, to Chinese fashion brand, V-GRASS, for 1 trillion won ($900 million). Teenie Weenie has about 1,200 stores in major department stores and shopping malls in China.

    The group, which has been desperate to raise cash over the past year, has also sold real estate and plans to list the shares of E-Land Retail in the first half of this year.

    “We believe that the Korea Investors Service has failed to reflect a series of self-rescue moves in its credit assessment of E-Land World. This is just irrational,” the spokesman said. “We will file a lawsuit against the agency to correct its irresponsible behavior.”

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