LG’s dollar-denominated bonds raise US$800 million
Korean giant LG Electronics has received an investment of US$800 million. The original plan was to attract US$1 billion. To this end, the company issued dollar-denominated bonds.
Details of negotiations on the bond issue
Officially, LG has not commented on its plans, but Reuters has previously learnt of negotiations with advisers. The source said the company was discussing the bond terms with several investment banks. There has been speculation that the securities will have a 3-year and a 5-year maturity. As for the pricing benchmark, it was in the following ranges:
– 3-year bonds – with a spread of 90 bps over Treasuries of the same maturity;
– 5-year bonds – with a spread of 110 bps over 5-year Treasuries.
The Korean giant initially targeted 135bp and 150bp for the 3-year and 5-year bonds respectively.
The proceeds of the 3-year bond issue will be for general business purposes, including investments and bond repayment. The 5-year dollar bonds will help the company achieve its sustainability goals. Funds from these bonds will go towards environmental projects and social initiatives.
After agreeing to all the terms, LG confirmed the deal. The company raised US$500 million through three-year bonds and US$300 million through five-year bonds as part of the bond issue.
It is worth noting that this was LG’s first dollar bond issue in 12 years.
Demand for the bonds was as follows:
– short-term borrowings totalled US$3.2 billion;
– the amount for 5-year bonds reached US$4 billion.
Asian investors were the main buyers. They outperformed their European and US counterparts.
Global market trends
Notably, there is record activity by Korean companies in the bond market in 2024. They are looking to diversify their funding by issuing dollar-denominated securities. Increased investor demand is also driving this trend. In contrast to South Korea, China is experiencing a slowdown, and investors are moving to new markets. In particular, buyers are attracted to ESG green bonds, which are 5-year bonds issued by LG. The desire for sustainable economic development, which is becoming a new stage in managing financial resources and investments, explains the enthusiasm for these bonds.
As for LG’s own goals, the company announced in 2023 that it plans to double its revenue by 2030. This figure is likely to reach around US$14.5 billion. The company aims to become one of the top 10 global component manufacturers for the automotive industry.
