LG Chem issues largest ever corporate ESG Bond
- Securing funds for investment in Green and Social Responsibility Projects to accelerate ESG management
■ 1.2 trillion won bond offering on the 15th of this month, including 820 billion won in ESG bond and 380 billion won in ordinary corporate bond
- Offering amount doubled from the initial plan of 600 billion won due to a large demand up to 2.56 trillion won during book building process.
■ Funds from ESG Bond offering will be fully utilized for investments in sustainability and new growth sectors such as ▲carbon neutral ▲battery materials ▲new drug development ▲shared growth
■ Dong Seok Cha (Executive Vice President / CFO),
“The successful issuance of the ESG bond is due to investors positively evaluating LG Chem’s sustainable business structure and future growth, including petrochemicals, advanced materials, and life sciences, even after the spin-off of the battery business.”
“ LG Chem will establish and implement specific measures to accelerate ESG management in all business sectors, and further solidify the company’s position as the leader in the field of sustainability.”
LG Chem will be issuing the largest ever ESG bond for a private corporation in Korea.
LG Chem released that on the 15th, the company will be issuing a total of 1.2 trillion won in corporate bonds, including 820 billion won ESG bond and 380 billion won ordinary corporate bond. This is the largest offering size for a private corporation, both in terms of ESG bond and total corporate bond offering size. (Previous record for ESG bond was the 500 billion won bond offering by Hyundai Steel in January 2021. Previous record for corporate bond was the 1.06 trillion won bond offering by SK Hynix in February 2020.)
LG Chem’s 820 billion won ESG bond offering is expected to serve as a turning point for ESG management within the industry, which previously remained only at declarative level, to transition to a full-scale investment and execution.
During book-building from institutional investors on the 9th, LG Chem received bids amounting to 2.56 trillion won, which is the second largest amount since introduction of book building process in Korea. Backed by the strong demand during book-building, LG Chem has decided to double the bond offering amount from the initial size of 600 billion won. (The highest book-building record is 2.64 trillion won by LG Chem in March 2019.)
The ESG bond to be offered by LG Chem is a sustainability bond, which is a hybrid of green bond and social bond. ESG bond is issued for purposes of investments in social responsibility of environment, social, and governance.
* Green bond : Fund for eco-friendly projects such as climate change/renewable energy, and infrastructure businesses
* Social bond : Funds to resolve social issues such as job creation, support for small and medium enterprises, and help for the vulnerable
* Sustainability bond : Hybrid of green bond and social bond
LG Chem plans to utilize the 820 billion won raised through the ESG bond offering in the following areas: △ investment in conversion to renewable energy and reduction of carbon emission △ construction of production process which uses eco-friendly raw materials △ expansion of electric vehicle battery material such as cathode materials △ expansion of facility for polio vaccine quality control △enhancement and replacement of industrial accident prevention facilities △ financial support for shared growth with small and medium-sized partners.
LG Chem has made sustainability the highest priority management task, and is accelerating its ESG management by developing new business models that provide innovative and sustainable solutions to the environment and society, such as ▲ recycling plastic ▲ biodegradable resins ▲ biodiesel-based eco-friendly resins ▲ supply of next generation polio vaccines, etc.
Don Seok Cha, Executive Vice President and CFO of LG Chem, stated that “the successful issuance of the ESG bond is due to investors positively evaluating LG Chem’s sustainable business structure and future growth, including petrochemicals, advanced materials, and life sciences, even after the spin-off of the battery business”.
“This year, LG Chem will establish and implement specific measures to accelerate ESG management in all business sectors, and further solidify the company’s position as the leader in the field of sustainability”.
In addition, the 380 billion won ordinary corporate bond issued together will be used for redemption of debt and funding for facilities in the petrochemical sector.
LG Chem’s current corporate bond offering consists of 350 billion won with 3- year maturity, 270 billion won with 5-year maturity, 200 billion won with 7-year maturity, 260 billion won with 10-year maturity, and 120 billion won with 15-year maturity. Among these, the 3/5/7-year maturity bonds are ESG bonds.
Interest rates for 3-year, 5-year, 7-year and 10-year maturity bonds are expected to be similar to the interest rate evaluated by credit rating agencies, and the 15-year maturity bond is expected to be set at 0.20%p lower than the interest rate evaluated by credit rating agencies. The actual rate will be finalized on February 18th.