LG Chem Ltd. is orchestrating South Korea’s largest price return swap transaction, targeting up to 3 trillion won ($2.2 billion) by leveraging its dominant stake in battery subsidiary LG Energy Solution Ltd.
The chemicals manufacturer has initiated discussions with securities houses to execute the stock-linked financing as early as month-end, when restrictions from a June exchangeable bond offering lift, according to investment banking sources. The transaction would monetize between 2.2% and 3.7% of LG Energy Solution, based on recent share prices.
The financing comes as LG Chem grapples with deteriorating fundamentals. Operating profit plummeted 64% last year to 916.8 billion won ($663 million) while revenue declined 11.5%. The company’s once-reliable petrochemicals division has suffered since 2023, while its prized battery unit faces headwinds from cooling electric vehicle demand in key markets.
LG Chem controls 82% of LG Energy Solution through 191.5 million shares, making it the world’s second-largest EV battery maker’s dominant shareholder. The proposed deal would dwarf previous Korean PRS transactions, representing nearly one-third of the roughly 10 trillion won raised through such arrangements since last year.
Expected borrowing costs of 4% to 4.5% exceed LG Chem’s three-year bond yields, highlighting the premium for this novel financing structure as the company seeks liquidity for corporate restructuring.
