LG Chem will raise 2 trillion won ($1.4 billion) through a derivative transaction backed by shares in its battery subsidiary, turning to a relatively costly financing method as the chemical maker grapples with mounting debt.
The Seoul-based company will use 5.75 million shares of LG Energy Solution as collateral in a price return swap arrangement with five domestic securities firms, according to a statement Wednesday. The transaction carries an interest rate of approximately 4.2% to 4.3% annually over three years—roughly 1.5 percentage points above LG Chem’s corporate bond rates.
The deal underscores financial pressures facing South Korea’s largest chemical company as it attempts to fund expansion into battery materials and biotechnology while managing debt that has climbed sharply in recent years. LG Chem’s net borrowing exceeded 8 trillion won as of the first quarter, up from 5.76 trillion won at the end of 2022.
The transaction will reduce LG Chem’s stake in LG Energy Solution by 2.5 percentage points to 79.4%. The company said proceeds will be used to repay loans taken for new business ventures. KB Securities, NH Investment & Securities, Korea Investment & Securities, Shinhan Securities and Daishin Securities participated in the arrangement.
The company will receive funds on Nov. 3, with the base share price set at 347,500 won.
