Samsung SDI (006400.KS) has opened 400 billion won ($290 million) in credit lines to fund large-scale investments.
According to industry sources on Thursday, Samsung SDI recently signed comprehensive credit facility agreements with the Export-Import Bank of Korea and KB Kookmin Bank worth 300 billion won and 100 billion won, respectively. The arrangements function as credit lines that allow the company to draw funds freely within the agreed limits. The loans carry a three-month maturity with interest rates of around 3 percent, sources said. Samsung SDI also borrowed 300 billion won in working capital through commercial banks earlier this year.
The battery maker has ramped up bank borrowings this year because its planned capital expenditures reach 2.9 trillion won. However, its cash and cash equivalents, a key indicator of investment capacity, stood at just 1.8039 trillion won at the end of last year.
Market observers widely assess that Samsung SDI's operating activities alone cannot cover the immediate investment needs, as the company is projected to post an operating loss of around 400 billion won this year. Although Samsung SDI signed electric vehicle battery supply contracts worth trillions of won with Mercedes-Benz and other automakers on Wednesday, the deals are multi-year agreements that do not bring in funds at once, meaning no immediate cash windfall.
Samsung SDI has therefore drawn up a funding plan to cover investments by increasing bank borrowings until it secures cash through the sale of its Samsung Display stake, sources said. Samsung SDI holds a 15.2 percent stake in Samsung Display and is pursuing a sale. The market estimates the value of the stake at around 10 trillion won.
As growth in the battery market slows, other battery manufacturers are also increasing bank borrowings. LG Energy Solution earlier this year borrowed 300 billion won from the supply chain stabilization fund, a government policy facility, to cover operating funds. "Battery makers are winning more supply contracts, but there are limits to improving cash flow in the short term," an industry official said. "Delaying investments due to cost burdens could lead to being pushed out of the market, so companies are taking on debt to continue investing."
