The First Time in the Global Chemical Industry
South Korea’s top secondary battery maker LG Chem Ltd. has successfully issued green bonds, which can be used to fund only eco-friendly projects, for the first time in the global chemical industry.
LG Chem announced on April 9 that it has issued a total US$1.56 billion (1.78 trillion won) in global green bonds, which is the biggest-ever volume for the relatively new asset class sold by a Korean company. A global green bond is an international bond that is issued and circulated in major global financial markets, such the United States, Europe, and Asia, at the same time. The proceeds are used to fund only environmentally-friendly projects such as renewable energy and electric vehicles.
The latest issuance of the green bonds has allowed LG Chem to secure foreign currencies at competitive yields compared to that of ordinary bonds and enhance its corporate image as a sustainable, environment-friendly company, according to the company.
LG Chem issued the dollar- and euro-denominated bonds in three different types of tranches – US$500 million (570.25 billion won) in notes dated 5.5 years, US$500 million(570.25 billion won) in 10 years, and 500 million euros (643.16 billion won) in four years. The dollar-denominated bonds with 5.5 year maturity are issued at a fixed coupon rate of 3.279 percent, 0.95 percentage point above the five-year U.S. government bond yield of 2.329 percent, and bonds with 10-year maturity at 3.695 percent, 1.175 percentage points above the10-year U.S. governmentbond yield of 2.52 percent. The four-year euro-denominated bonds are sold at a coupon rate of 0.599 percent, 0.65 percentage point above Europe’s four-year mid swap rate of minus 0.051 percent. The figure went down by at least 0.275 percent, or 27.5 bps, to up to 0.35 percent, 35 bps, compared to the initial interest rate.
LG Chem said it raised the debt in favorable conditions due to overwhelming demand. Subscriptions amounted to US$10.50 billion, including US$5.90 billion (6.73 billion won) and 4.10 billion euro (US$4.62 billion or 5.27 trillion won), the largest figure for a Korean bond issue in the U.S. and European financial markets. LG Chem plans to use the proceeds from the green bond sale as an investment fund to supply electric vehicle battery orders.
Jeong Ho-young, chief operating officer (COO) at LG Chem, said, “The successful bond issuance is a global recognition of the company as the world’s most competitive player in the electric vehicle battery sector.”