Nashinpyung "LG Chem Battery Business Split, Limited Impact on Credit Rating"

[Asia Economy Reporter Minji Lee] Opinions have emerged that the division of LG Chem's battery business division will not have a significant impact on LG Chem's credit rating. On the 22nd, NICE Credit Rating evaluated that the possibility of changes in business and financial risks of LG Chem's consolidated entity is limited.

LG Chem plans to spin off its battery business division through a physical division and establish a new corporation tentatively named LG Energy Solution. The main purpose of this physical division is to enhance the expertise and market dominance of the battery business division and to improve management efficiency through the establishment of an independent and swift decision-making system. The physical division is scheduled to be completed on December 1.

Jaeyoon Lee, Senior Researcher at NICE Credit Rating's Corporate Evaluation Office, explained, "In the case of the battery business division spin-off, the possibility of changes in business and financial risks of LG Chem's consolidated entity is limited due to the physical division form," adding, "Regarding debts before the corporate division, both the surviving company and the newly established company bear joint responsibility for repayment according to the Commercial Act, so the impact on credit rating is neutral."

In the case of LG Energy Solution, it is expected to alleviate financial burdens arising from new capital investments. Researcher Jaeyoon Lee stated, "In the mid-term, there is a persistent large financial burden for capacity expansion, and if the initial public offering and paid-in capital increase proceed smoothly, it will ease the financial burden from investments."

He continued, "We will closely monitor the progress of the battery business division's physical spin-off, the initial public offering, and capital increase through new share issuance," and analyzed, "We will comprehensively review changes in operating profitability, increased borrowing burdens due to equity investments, and the spread of COVID-19, reflecting these factors in the credit rating."

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