Affinity Equity Partners, the private equity firm that acquired South Korea’s two largest rental car companies, is securing 1.3 trillion won ($908 million) in acquisition financing, consolidating debt for both businesses into a single package. The move is expected to reduce interest rates on existing loans tied to SK Rent-A-Car.
According to investment banking sources on Feb. 24, five financial institutions—Korea Development Bank (KDB), Woori Bank, KB Kookmin Bank, KB Securities, and Hana Securities—are leading the financing arrangement for Lotte Rental and SK Rent-A-Car. KB Kookmin Bank and KB Securities had previously co-arranged financing for last year’s acquisition of SK Rent-A-Car.
The investment firm purchased a 100% stake in SK Rent-A-Car from SK Networks in Aug. 2024 for 820 billion won ($573 million). In Dec., it signed a stock purchase agreement (SPA) to acquire a 56.2% stake in Lotte Rental from Hotel Lotte and Lotte Hotel Busan for 1.57 trillion won ($1.09 billion), valuing the company at 2.8 trillion won ($1.95 billion). Lotte Rental and SK Rent-A-Car are the market’s first- and second-largest players, respectively.
Although the SK Rent-A-Car acquisition was completed last year, Affinity initially delayed securing acquisition financing. A banking industry source said that while loan agreements had been arranged, some limited partners (LPs) requested that the equity portion be covered first, postponing the execution of the financing. The initial acquisition cost was covered through capital calls from LPs, and the firm is now recapitalizing to return capital to investors.
Another industry source noted that lower interest rates may also be a factor in the timing of the financing. The firm secured acquisition funding for SK Rent-A-Car last year at a rate in the mid-to-high 6% range but is now expected to refinance at around the mid-5% range.
The acquisitions initially raised concerns over valuation. When SK Rent-A-Car was acquired, some analysts questioned whether the deal was overpriced, given that market leader Lotte Rental had a market capitalization of just 960 billion won ($670 million) at the time. With SK Rent-A-Car generating roughly half the revenue and used car sales of Lotte Rental, critics argued its valuation should have been adjusted accordingly.
For Lotte Rental, the purchase price was set at 77,115 won ($54) per share, more than 2.3 times its market value at the time. This has fueled concerns in financial markets over whether Affinity will be able to sell both rental car companies at a favorable price in the future.
