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'After Twists and Turns With Withdrawal of Business Shutdown', Purmil Puts Up Head Office Building as Trust Collateral for Loans

[비즈한국] Purmil, which declared and then withdrew its business shutdown in 2022, has put up its head office building as collateral. Purmil explains that it used real estate trust collateral in the process of refinancing from second-tier financial institutions, which it had been using until last year, to first-tier financial institutions this year. Purmil is achieving results, such as improving its financial structure after intense restructuring. However, it is assessed that there are still tasks left before complete management normalization, as operating losses still reach several billion won.

26.1 Billion Won in Loans from Banks and Credit Card Companies

It has been confirmed that the dairy specialist Purmil has set its head office building as trust collateral. According to the real estate register and the trust deed, in April, Purmil transferred the ownership of its head office building and land in Mullae-dong, Yeongdeungpo-gu, Seoul, to a trust company and designated commercial banks and credit card companies as priority beneficiaries.

It is interpreted that Purmil set its head office building as trust collateral to receive loans from financial institutions. When companies raise funds, they sometimes set up mortgage rights on collateral real estate, but using trust registration often results in higher loan limits than general mortgage loans.

According to the trust deed, the first-priority beneficiaries for the collateral rights are H Bank and H Credit Card. The beneficiary amounts are approximately 22.3 billion won for H Bank and 200 million won for H Credit Card. In August, a change agreement for the real estate trust deed was drawn up, and H Bank was also added as a second-priority beneficiary (beneficiary amount of 3.6 billion won). Currently, a total of approximately 26.1 billion won in debt is secured by the Purmil office building.

The site area of Purmil's head office building is approximately 4,619㎡ (about 1,397 pyeong). The headquarters consists of two buildings: a main building and an annex. The main building spans from one basement floor to four floors above ground (total floor area of 4,300㎡), and the annexes consist of one two-story building and one single-story building. The total floor area of both the main building and the annexes is approximately 4,700㎡ (about 1,425 pyeong).

Purmil also raised funds using its office building as collateral in 2022. At the time, it set up a mortgage with a maximum debt amount of 6 billion won; ownership was later transferred to a bank trust before reverting to the company in May 2024. This mortgage was canceled in April of this year.

Regarding the reason for putting the head office building up as trust collateral, Purmil explained it was "part of improving management conditions." They stated that because of corporate credit rating issues, they had previously received loans from second-tier financial institutions, but as their credit rating rose this year, they switched to first-tier financial institution loans and utilized the trust method in the process. Indeed, according to the audit report, Purmil had approximately 10 billion won in real estate mortgage loans (based on short-term borrowings) from second-tier financial institutions as of the end of 2024.

A Purmil official said, "Our company's credit rating has recently improved, so we refinanced with first-tier financial institution loans," adding, "All loans from second-tier financial institutions have been settled. Only first-tier institution loans will be reflected in the 2025 disclosure."

Financial Improvements Made, But Not Yet Profitable

Purmil began as Lotte Milk in 1978. It spun off from Lotte Group in 2007 and changed its name to Purmil in 2009. Former Chairman Shin Joon-ho, the fourth younger brother of the late Lotte Group founder Shin Kyuk-ho, served as CEO before stepping down from the front lines of management in 2022. Currently, Shin Dong-hwan, the second son of former Chairman Shin, is leading the company.

Purmil became the center of controversy in October 2022 when it suddenly announced a business shutdown. Social criticism and resistance from the labor union followed, and the company eventually withdrew its shutdown plan after about 20 days.

After the decision to resume business, Purmil underwent intense restructuring. It suspended operations at its Jeonju plant and reduced about 30% of its total workforce through voluntary retirement. It revamped its brand image with the message "a company saved by customers" and sought a business structure transformation by expanding OEM (Original Equipment Manufacturing) and focusing on profitable products.

The effects of these measures are also evident in the financial results. Purmil succeeded in significantly reducing its deficit last year. Annual revenue last year was 69.2 billion won, a 5.6% increase from the previous year (65.5 billion won). Operating losses also decreased significantly to 2.8 billion won compared to the previous year (11.3 billion won) due to reductions in cost of sales and selling, general, and administrative expenses. Inventory burdens were also eased, with inventory assets decreasing from 5.3 billion won in 2023 to 3.7 billion won last year, and short-term borrowings nearly halved from 69.7 billion won to 34.2 billion won during the same period.

This year, they have also been actively launching new products. In July, they introduced two new coffee products: Purmil Explorer Yirgacheffe Premium Latte and Kenya AA Premium Latte. Last month, they filed multiple trademark applications related to matcha latte, showing the possibility of future new product launches.

In 2022, CEO Shin Dong-hwan announced a group vision for operational normalization, setting a goal for profitable management in 2023. However, it has not yet turned a profit. Some point out that since operating losses still amount to billions of won, it will take more time to generate stable profits from their core business.

A Purmil official explained, "The company's situation is continuously improving," adding, "Things are much better this year than last year."