South Korea’s LG Chem Ltd. has successfully completed the issuance of foreign exchange bonds (EBs) worth a record $2 billion, with the stock price of its subsidiary LG Energy Solution Ltd. down due to overhang concerns on Wednesday.

According to the Financial Supervisory Service’s electronic disclosure system, LG Chem decided to issue non-guaranteed overseas EBs worth 2.6 trillion won ($2 billion) on Wednesday. EBs refer to bonds that grant the holder the right to exchange them for shares held by the issuer. LG Chem’s EBs were issued in U.S. dollars and divided into two tranches with maturities of five years and seven years, respectively. To attract investors, LG Chem held a call for investors targeting Asian and European markets. More than 150 investors and institutions participated in the call, resulting in an influx of funds totaling $10 billion, five times the initial issuance target.

According to Goldman Sachs, the global investment bank that participated in the issuance, LG Chem’s offering is the largest among stock-linked bond sales worldwide since 2021. In terms of the Korean market, it is the largest issuance ever, and in the Asia-Pacific region, it is the largest since 2002.

As a result, the final interest rates for the maturity periods were set at 1.25 percent for the five-year bonds and 1.60 percent for the seven-year bonds. The target for the bond exchange is the common stock of LG Energy Solution, a subsidiary in which LG Chem holds an 81.84 percent stake. The number of shares and percentages for the exchange were set at 1,883,636 shares (0.8 percent of the total) for the five-year bonds and 1,811,188 shares (0.77 percent) for the seven-year bonds.

The exchange prices for the bonds were set at a high premium of 25 percent for the 5-year bonds and 30 percent for the 7-year bonds, based on LG Energy Solution’s closing price of 550,000 won on July 11.

LG Chem plans to use the funds raised through the issuance of EBs for facility investments and operational purposes.

“LG Chem has proactively secured funds for new business investments through the issuance of exchange bonds,” said Cho Cheol-hee, an analyst at Korea Investment & Securities. “As can be seen from the conditions of the issuance, LG Chem has no liquidity issues, which will enhance its stability and relative competitiveness in the petrochemical industry.”

On the same day, LG Energy Solution concluded trading at 534,000 won, down 2.91 percent from the previous trading day.

By Park Yoon-yea and Minu Kim

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