LG Display to raise $494 mn through syndicated loan

LG Display Co., the world’s leading manufacturer of organic light-emitting diode (OLED) panels, will raise 650 billion won ($494 million) by taking out a syndicated loan as its corporate bonds worth 4.53 trillion won mature this year.

The South Korean company recently entered into a loan agreement with Korea’s Shinhan Bank, the state-run Korea Development Bank (KDB) and the Export-Import Bank of Korea (KEXIM). The 650 billion won loan is with a three-year maturity at a 5.4% rate, according to banking sources on Thursday.

The display panel maker raised 200 billion won in a syndicated loan late last year. It will secure the other 450 billion won in the first half of this year, after completing a 1.36 trillion won rights offering. 

It is the first time in more than five years that LG Display has borrowed capital via a syndicated loan. In 2018, the company signed an 800 billion won loan agreement with a consortium led by KDB for a transition into an OLED-focused business structure. After that, the panel maker used corporate bonds and bank lending for financing.

SYNDICATED LOAN FOR LOWER RATE

LG Display is seeking diversification of funding resources as the interest rates for its corporate bonds have jumped with its dropped credit rating, industry insiders say. Korea’s three rating agencies – Korea Investors Service Inc., Korea Ratings Corp. and Nice Investors Service Co. – lowered the panel maker’s credit rating from A+ to A last year.

The interest rate of its bonds, which was in the 2% range in 2021, has more than doubled. In April last year, LG Display borrowed 1 trillion won from its largest shareholder LG Electronics Inc. at a 6.06% rate.

“LG Display bonds, issued at around 3% rate three years ago, will mature from this September. The company’s syndicated loan will back its short-term financing with a lower rate than corporate bonds,” an investment banking source said.

DEBT REPAYMENT

LG Display logged operating losses for the sixth straight quarter in the July-September period of last year. From the second quarter of 2022 to the third quarter of 2023, the cumulative losses amounted to 4.77 trillion won.

The loss-making company’s bonds worth 4.53 trillion won mature this year, and its interest expenses exceeded 500 billion won in the third quarter of last year.

The company said it is set to repay dollar bonds and environmental, social and governance bonds by using 400 billion won out of the 1.36 trillion won rights offering.  

It is not planning an additional large-scale borrowing after the syndicated loan, said an LG Display official. It will focus on improving financial stability and profitability by expanding small and medium-sized OLED panel sales and managing liquidity through loan repayment, the official added.

Write to Ye-Jin Jun at ace@hankyung.com

Jihyun Kim edited this article.