LG Chem announced on the 28th that it has decided to enter into a price return swap (PRS) contract worth approximately 2.5 trillion won, using shares of its subsidiary LG Energy Solution as the underlying asset.
The underlying asset consists of 6,535,939 common shares of LG Energy Solution, with a reference price of 382,500 won per share. The contract term is two years. The related share disposal is scheduled to take place from the 27th of next month through December 24.
A PRS is a method in which a company transfers its held shares to a financial institution to secure funds, and then settles the difference based on stock price fluctuations at contract maturity. If the stock price rises above the reference price, the financial institution pays the difference to the company; conversely, if it falls, the company pays the difference to the financial institution.
This is the second time LG Chem has secured large-scale liquidity by utilizing its stake in LG Energy Solution. In October of last year, the company also entered into a PRS contract worth approximately 2 trillion won using 5.75 million common shares of LG Energy Solution.
Under this contract, LG Chem's ownership ratio in LG Energy Solution is expected to decrease from the previous level of approximately 79.4% to 76.59%. In a conference call during its earnings release in January of this year, LG Chem had disclosed plans to reduce its stake in LG Energy Solution to around 70% by 2030.
LG Chem is simultaneously pursuing business restructuring and investment in new businesses amid the prolonged slump in the petrochemical industry. The move is interpreted as an effort to secure cash and reduce borrowing burdens by utilizing its stake in LG Energy Solution, given the need for funding to restructure petrochemical facilities and invest in growth areas such as advanced materials.
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