LG Innotek has issued 200 billion won in electronic short-term bonds so far this year. The move is seen as a preference for short-maturity funding amid persistent interest rate uncertainty. With the company maintaining solid operating cash generation, concerns over a deterioration in its financial structure are considered limited.
According to the investment banking (IB) industry on the 7th, LG Innotek issued electronic short-term bonds totaling 100 billion won on the 6th. The funds were raised in two tranches of 50 billion won each, both maturing on the 29th of next month. LG Innotek also issued a 46-day note and a 39-day note, each worth 50 billion won, in May this year. As a result, LG Innotek's cumulative electronic short-term bond issuance this year stands at 200 billion won.
LG Innotek had initially been reported to be pursuing a public corporate bond issuance in June, but it appears to have turned to short-term notes as the surge in corporate bond rates continued. LG Innotek issued a total of 300 billion won in public corporate bonds in February 2024. The maturity structure (tranches) consisted of three-year and five-year notes, with the three-year tranche set to mature in February next year.
Korea Investors Service rated LG Innotek's corporate bond credit rating at AA- in June this year. For short-term bonds, it maintains the highest rating of A1. As of the end of March this year, LG Innotek's cash and cash equivalents totaled 1.3726 trillion won, which the assessment indicates can cover 825.1 billion won in borrowings maturing within one year as well as short-term funding needs such as capital expenditure.
Its financial structure also remains stable. Net borrowings stood at 751.1 billion won at the end of the first quarter this year, down from 1.2988 trillion won at the end of 2023, lowering the ratio of net borrowings to earnings before interest, taxes, depreciation and amortization (EBITDA) to 0.3 times. Moon Chang-soo, a researcher at Korea Investors Service, analyzed, "The business foundation is stable, as favorable trading relationships continue with affiliates and clients that are top global players in fields such as home appliances, smartphones, semiconductors and automobiles." He added, "While there is a burden of future capacity expansion investment, continued reduction of borrowings is expected to be possible based on solid operating cash generation."
