이 기사는 2022년 01월 21일 08:06 thebell 에 표출된 기사입니다.

LX International, the trading arm of South Korea’s conglomerate LX Group, will tap the corporate bond market, backed by a stable credit rating and solid performance.

LX International plans to launch the bookbuilding process on Thursday to raise a total of 200 billion won ($168 million) in a bond issuance on Januray 28, according to industry sources. It aims to raise 100 billion won in a 3-year tranche, 60 billion won in a 5-year tranche, and 40 billion won in a 7-year tranche, with a possibility of increasing the amount depending on the results of the bookbuilding.

Of the total proceeds, 60 billion won will be used for working capital purpose, with the remaining amount used to repay debts issued in 2015. The existing debts will reach maturity in March and May, but the company seems to aim to secure funds in advance amid growing uncertainties over possible interest rate hikes.

This will mark LX International’s first bond offering since LX Holdings’ spin-off from LG Corp. In May 2021, LG Corp, the holding company of South Korea’s fourth largest conglomerate LG Group, spun off a new holding company LX Holdings and handed over its stakes in five firms including LX International, formerly LG International, and LX Hausys, formerly LG Hausys.

LX Holdings is the largest shareholder of LX International with a 24.69% stake as of September 2021.

Three local credit rating agencies – Korea Investors Service, NICE Investors Service, and Korea Ratings Corporation – have retained their credit ratings of LX International at AA- with a stable outlook even after the separation.

They expected the company to continue its solid business partnership with LG Group for the time being as discontinuing the partnership will cost LG Group more money, with greater inefficiency.

“LG Group has long relied on LX International’s subsidiaries for information on logistics operations,” said Korea Ratings. “Given that it is quite inefficient to change the logistics system, transactions between LX International and LG Group will remain stable.”

LX International’s business relationship with LG is the key for its credit rating. LX International’s profitability depends heavily on the logistics business, which accounts for more than 50% of the company’s operating profit.

LX International’s logistics business is showing positive performance thanks to stronger demand for equipment transportation from LG Chem and LG Display for their expansion of overseas factories and an increase in LG Electronics’ shipments.

LX International’s best-ever financial performance is also expected to help attract more investors to the bond offering. The company recorded an operating profit of 448.6 billion won on revenue of 12.1 trillion won at the end of September 2021 on a consolidated basis, up 290% and 53% year-over-year respectively. The company has hardly hit by the Covid-19 pandemic as it had tried to diversify revenue sources across various regions.

The financial status will also likely remain sound. Its net debt to earnings before interest, taxes, depreciation and amortization ratio was 1.3 times at the end of September 2021 on a consolidated basis. (Reporting by Ji-hye Lee)