LG Energy’s 1st bond issue draws record $3.6 bn in bids

LG Energy Solution Ltd.'s first bond issue was 10 times oversubscribed on Thursday, drawing a record 4.7 trillion won ($3.6 billion) in bids for a South Korean corporate bond sale, according to people familiar with the matter.

The strong demand for the 500 billion won ($390 million) issue may tempt the world’s No. 2 rechargeable battery maker to double its issuance volume to 1 trillion won with a much lower coupon rate than the average for companies with the same credit rating, the sources said.

It is the first time for the LG Group arm to sell bonds since it was hived off from LG Chem Ltd. in December 2020. It also marked the first time that the company tapped public funding markets since it raised about 10 trillion won in the country’s largest IPO early last year. 

THREE MATURITIES

LG Energy is selling bonds with three different maturities: 200 billion won with a maturity of five years; 200 billion won with three years' maturity; and 100 billion won with two years.

In the book building, the bids amounted to 1.85 trillion won for the five-year issue; 1.74 trillion won for the three-year one; and 1.14 trillion won for the two-year issue.

Their coupon rates are expected to be set 14 to 33 basis points below the average for corporate bonds with the same double-A rating, according to the sources.

The bid amount for the LG Energy bonds marked the largest ever for a South Korean company since the country introduced the book building process for corporate bond sales in 2012.   

In January of this year, POSCO Holdings Inc., rated double A plus, drew almost 4 trillion won in bids for its 350 billion won bond sale.

LG Energy’s solid earnings and the bullish outlook for the electric vehicle battery market fueled demand for its first-ever bond issue, which also attracted investors chasing environmental, social and governance themes.

It will use the proceeds to buy cathodes, an ingredient of battery materials and invest in its joint ventures with Honda Motor Co., Hyundai Motor Co. and Stellantis N.V.

LG Energy posted 633.2 billion won in operating profit on sales of 8.7 trillion won in the first quarter of this year. The results were up 145% and 101%, respectively, from a year earlier.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Yeonhee Kim edited this article.