LG Energy's 2nd bond issue hits record $4.2 bn in bids

LG Energy Solution Ltd., the world’s second-largest rechargeable battery maker, drew a record 5.61 trillion won ($4.2 billion) in bids for a South Korean corporate bond sale on Wednesday, surpassing its previous record.

The battery maker opened bookbuilding for its second bond sale valued at 800 billion won on Feb. 7. The bond has three different maturities: 120 billion won for a two-year maturity; 360 billion won for a three-year maturity; 240 billion won for a five-year; and 80 billion won for a seven-year.

The bids amounted to 1.34 trillion won for the two-year issue; 2.55 trillion won for the three-year; 1.42 trillion won for the five year; and 305 billion won for the seven-year one.

Total bids hit a record since Korean financial authorities introduced the corporate bond bookbuilding system in 2012. The bids also broke the previous record — the subscription for the company’s first bond issue in June. 

LG Energy will decide whether to increase the bond issue from the current 800 billion won to 1.6 trillion won, the maximum. If the company increases the issue to the maximum level, it will set a record for the largest issue of a Korean corporate bond, exceeding SK Hynix Inc.'s 1.39 trillion won issue in February 2023.  

The company is likely to expand its bond issue to the maximum limit as it has secured a record subscription, a banking source said.

LG Energy took advantage of investors’ strong demand for debts around the beginning of the year. Net issuance of Korean corporate bonds in January hit a record 7.1 trillion won, according to the Korea Financial Investment Association (KOFIA).

The battery maker succeeded in issuing AA-rated bonds that provide yields lower than local credit rating agencies’ suggestions, by 16 to 32 basis points (bps) depending on the maturities.

The bond issue attracted investors’ interest thanks to its robust earnings despite slower growth in the electric vehicle market. The company posted 2.16 trillion won in operating profit last year, a record surplus since being spun off from LG Chem Ltd. in December 2020.

LG Energy is seeking a bond issue to finance its global facilities for battery manufacturing. The company raised 1 trillion won through local bonds and an additional $1 billion in global green bonds last year.

The company plans to inject the capital into its three joint plants with General Motors Co. They operate a battery making factory in Ohio with 35-gigawatt hours (GWh) of annual production capacity and are now building a 35 GWh plant in Tennessee and a 50 GWh factory in Michigan.

LG Energy is also building a 45-GWh battery factory in Canada with Stellantis N.V., a 40-GWh plant with Honda Motor Co. in Ohio, and a 35-GWh factory with Hyundai Motor Co. and Kia Corp. in the US state of Georgia.

Write to Hyun-Ju Jang at blacksea@hankyung.com
Jihyun Kim edited this article.