The holders of corporate bonds issued by loss-making Lotte Chemical Corp. agreed Thursday to remove a clause in the company's bond covenants that the company and others believe has been the cause of recent concerns over a potential liquidity crisis at Lotte Group.

Under the clause in the covenants for 14 bonds issued between September 2013 and March 2023, investors are able to declare an event of default and demand an early redemption of the bonds if Lotte Chemical fails to maintain a certain level of profit over the previous three years.

Declaration of an EOD in a certain bond could result in the cross-default of all Lotte Chemical borrowings, which in turn raises the possibility of liquidity risk for the entire group.

Speculation of a liquidity crisis, denied by the group, was sparked by a sharp decline in the profitability of Lotte Chemical amid a significant downturn facing the whole petrochemical industry.

Lotte Chemical needed to report earnings before interest, taxes, depreciation and amortization that are five times higher than its interest expenses for the bonds in the past three years that ended Sept. 30, but its operating losses deepened to 660.03 billion won ($455 million) in the January-September period from a 31.87 billion won loss a year earlier due to slowing demand, overcapacity and increased competition.

Dismissing such liquidity woes, the company earlier said it had 4 trillion won in readily available deposits as of October, which it argued was enough to repay the principal and interest of its bonds.

In addition, the company has preemptively secured 660 billion won based on its stake in its US production facility and plans to secure an additional 650 billion won using its stake in its plant in Indonesia, a company spokesperson said over the phone.

It also plans to liquidate its synthetic rubber plant in Malaysia as part of the group's efforts to streamline businesses that do not align with its mid- and long-term strategy.

The Korean retail giant plans to pursue a "two-track" strategy of selling off such businesses while expanding investments in emerging sectors, such as biohealth and artificial intelligence.

Earlier this month, Lotte Group selected Hong Kong-based private equity fund Affinity Equity Partners for talks to sell its car rental arm Lotte Rental Co. for 1.6 trillion won.

Last month, the group said it will provide Lotte World Tower in Seoul as collateral for the corporate bonds of the cash-strapped chemical unit. (Yonhap)