LG Electronics has raised 400 billion won ($333 million) in short-term funding through a Japanese bank.
According to industry sources on the 11th, LG Electronics obtained a 400 billion won working capital loan from Japan's Sumitomo Mitsui Banking Corporation last month. The amount significantly exceeds the approximately 260 billion won outstanding balance the company had borrowed from domestic commercial banks including Woori Bank and KB Kookmin Bank. While LG Electronics had previously secured long-term financing with maturities of two years or more through commercial banks, the new loan was set with a maturity of less than three months.
The move is aimed at securing funds needed to repay corporate bonds maturing in the first half of this year. Under normal circumstances, companies typically refinance maturing bonds at the same scale. However, given persistent market uncertainty, the company decided to first raise short-term funds to meet some of its financing needs while monitoring market conditions. LG Electronics has approximately 520 billion won worth of corporate bonds maturing in the first half of this year.
For LG Electronics, there was a significant need to diversify funding channels as payment settlement demands for suppliers tend to concentrate temporarily at the beginning of the year. In fact, eight LG Group affiliates including LG Electronics made early payments totaling 600 billion won last month.
Market observers suggest that if bond market uncertainty continues due to the fallout from U.S.-Iran tensions, more companies will likely turn to bank financing. An industry official said, "Even with higher interest rates, the interest burden is relatively lighter if the maturity is short," adding, "From a corporate perspective, it makes sense to diversify funding channels until the corporate bond market stabilizes."