SK Geo Centric secures $363 mn in sustainability loans on favorable terms

SK Geo Centric Co., a South Korean petrochemical company, said on Tuesday it has secured 475 billion won ($363 million) in sustainability-linked loans (SLLs) from global financial institutions to finance its green projects.

The chemical unit of SK Group said it has signed a deal on the three-year loan with five banks – BNP Paribas S.A., Agricultural Bank of China, the Bank of China, MUFG Bank Ltd., and Credit Agricole Corporate and Investment Bank.

The loan will be used for SK Geo Centric’s planned construction of a recycling cluster to process plastic waste into petrochemical products in the country’s southeastern city of Ulsan.

With an annual plastic processing capacity of 250,000 tons, the cluster is slated for completion in 2025.

An SLL is a loan that encourages borrowers to achieve ambitious sustainability performance targets. The financing instrument is increasingly popular as it funds companies at lower interest rates as long as they achieve pre-arranged emission cut targets.

SK Geo Centric, formerly known as SK Global Chemical, said it secured the sustainability loan at an annual interest rate of 5.64%, a 1.5-percentage-point premium to the benchmark 90-day certificate of deposit (CD) interest rate.

The company’s three-year corporate bond, rated AA-, was trading with an annual interest rate of 5.42% on Monday, but new issuance at a rate between 7% and 8% has been a hard sell in recent weeks due to worsening financial market conditions, industry watchers said.

With the 475 billion won sustainability loan, SK Geo Centric will be able to save borrowing costs of between 9.2 billion won and 14.2 billion won annually, they said.

SK Geo Centric said it earlier received verification of its eco-friendly business goals and authenticity from DNV, a Norway-based international certification company, and submitted it to the five banks to secure the loan at favorable terms.

SK Geo Centric, wholly owned by SK Innovation Co., has been pushing to transform its business model from conventional petrochemical product manufacturing into green chemistry such as plastic waste recycling and chemical decomposition.

“ It is significant that our waste plastic recycling business has been internationally certified as an eco-friendly business,” said SK Geo Centric Chief Executive Na Kyung-soo.

Write to Ik-Hwan Kim at lovepen@hankyung.com
In-Soo Nam edited this article.