Ecocreation, Korea's leading waste plastic recycling company, has fallen into default after failing to repay its debt. The company holds the technology to produce pyrolysis oil, a petroleum substitute, by thermally decomposing waste plastic, and is regarded as an eco-friendly firm in the circular economy. Market observers say policy funding support is needed, given that renewable energy companies struggle to generate early earnings.
According to the investment banking (IB) industry Friday, SNS Investment recently notified Ecocreation of an event of default (EOD) and is demanding repayment of its investment. The outstanding principal Ecocreation must repay is 4.3 billion won. Ecocreation requested a delay in the repayment schedule from investors, but investors have not accepted this, saying immediate repayment is necessary.
SNS Investment formed an investment fund and invested 9 billion won in April 2022. The fund included SNS Investment along with IBK Capital, Mirae Asset, Samsung, Shinhan Investment, and SK Securities. At the time, the fund invested in Ecocreation in the form of convertible bonds (CB), with a four-year maturity that came due on April 27 this year. At the time of investment, Ecocreation's corporate value was assessed at around 160 billion won.
The decisive trigger for Ecocreation's EOD was its failure at an initial public offering (IPO). Ecocreation launched its formal listing process in July last year by filing for preliminary review with the Korea Exchange. While reviews typically take 45 business days, the examination continued for six months. At the time, the exchange is known to have scrutinized in detail whether the 19.6 billion won in revenue recorded in 2024 was sustainable. The company ultimately withdrew its listing plan early this year.
Although investors are demanding repayment of the CB, analysts say the likelihood of Ecocreation repaying it is not high. With an earnings gap continuing since last year, first-quarter revenue this year plunged from a year earlier, and the company is still posting operating losses. The cash and cash equivalents the company holds also fall far short compared to the repayment balance.
Founded in 2010, Ecocreation is considered a key player in the "circular economy" with Korea's only catalyst-based waste plastic pyrolysis technology. In 2019, Ecocreation was selected as a company to carry out a national research project for the Ministry of Environment, researching "waste plastic pyrolysis technology," and at the time received Korea's first New Excellent Technology (NET) certification from the Ministry of Environment.
Pyrolysis has the advantage of being able to process contaminated waste plastic that cannot be handled by other technologies. According to market research firm Credence Research, the pyrolysis oil market reached 1.8 billion dollars (2.78 trillion won) in 2024 and is expected to grow to 3.67 billion dollars (5.6591 trillion won) by 2032. The compound annual growth rate over this period is about 9.25 percent.
Some in the market say that, given the government has raised large-scale policy funds, policy support for eco-friendly companies is worth considering. As eco-friendly capabilities become increasingly important in the global market, they point out that early support is needed until firms achieve economies of scale and build a stable revenue structure. "Recent policy funds are being supported mainly for the artificial intelligence (AI) and semiconductor industries," an IB industry official said. "There is a need to broaden support to a more diverse range of industries and to where funds are urgently needed."
