‘Betting on Batteries’ LG Group Issues Record-High Corporate Bonds Through Domestic and Overseas Investments

Aggressive External Fundraising Led by LG Chem and LG Energy Solution
Mostly Used for Domestic and Overseas Production Facilities and Overseas Joint Venture Investments

LG Group has issued the largest-ever amount of corporate bonds this year. Following the spin-off of LG Energy Solution, investments in the secondary battery sector have been strengthened, leading to a significant increase in external financing.

4.7 Trillion Won in Half a Year... Second Largest by Bond Issuance after SK Group

According to the investment banking (IB) industry on the 22nd, LG Group issued a total of 4.657 trillion won worth of corporate bonds this year. This is four times the amount of corporate bonds issued last year (1.295 trillion won). The previous annual record for corporate bond issuance was 3.8 trillion won in 2013. This year, the record was surpassed in just half a year.

The ranking of corporate bond issuance by large business groups has also changed. Except for last year, LG Group was the third largest issuer in the corporate bond market after SK Group and Lotte Group. This year, LG Group ranked second in issuance volume among large business groups, following SK Group (8.435 trillion won).

By affiliate, LG Energy Solution issued the largest amount of corporate bonds at 1 trillion won. Following were LG Electronics (830 billion won), LG Chem (800 billion won), and LG Uplus (700 billion won) in order of issuance volume. LG CNS (400 billion won), LG Innotek (400 billion won), LG Display (337 billion won), LG HelloVision (130 billion won), and Pharmanong (50 billion won) also continued bond issuance.

When including the $2 billion (approximately 2.6 trillion won) overseas exchangeable bonds (EB) issued by LG Chem, the scale of bond financing increases significantly. Combining domestic won-denominated corporate bonds and foreign currency bonds, the total domestic and international bond issuance this year exceeds 7 trillion won.

An IB industry official said, "LG Chem has rapidly spent the 10 trillion won raised through LG Energy Solution's initial public offering (IPO), and since early this year, it has increased external financing to secure funds for investments and debt repayments," adding, "The large-scale financing by LG Chem and LG Energy Solution has led to a sharp increase in LG Group's bond issuance compared to previous years."

Funds Used for Domestic and Overseas Secondary Battery Investments

LG Group has used or plans to use a significant portion of the raised funds for secondary battery investments. LG Chem is mainly investing in secondary battery materials such as cathode materials, while LG Energy Solution is focusing on investments in North American joint ventures for battery production.

LG Chem plans to invest 10 trillion won in battery materials over the next five years. In particular, it is focusing on securing production facilities for secondary battery materials in key domestic and overseas regions in response to the U.S. Inflation Reduction Act (IRA) and the European Critical Raw Materials Act (CRMA). It is investing 4 trillion won in a cathode material plant in Clarksville, Tennessee, and is considering building cathode material plants in Germany, Hungary, and Poland. Currently, it is also building a precursor plant with a 1.2 trillion won investment in cooperation with China’s Huayou Cobalt and Saemangeum.

LG Energy Solution announced that out of the 1 trillion won in corporate bonds issued in June, 900 billion won will be used for investments in North American joint ventures with automakers such as Stellantis, Honda, and Hyundai Motor Group. The planned investment in three North American subsidiaries by 2028 amounts to 5.66 trillion won.

Other group affiliates have mostly used the funds raised through corporate bonds for debt repayment and operating expenses. A corporate bond market insider said, "New corporate bond issuance by LG Group is concentrated on LG Chem and LG Energy Solution," adding, "This shows that LG Group’s investments for securing future growth engines are focused on the secondary battery sector."

An IB industry official predicted, "With investment plans set for the coming years, LG Group’s aggressive financing is expected to continue for some time," and added, "Depending on market conditions such as interest rate movements and credit issues, the methods of financing may also vary."