[Funding] SK Inno Secures Liquidity Using 'Receivables from Hyundai Mobis'

Raised 250 Billion KRW Through Accounts Receivable Securitization
Battery Sales Increase via Alliance with Hyundai Motor
Burden of Settlement Payment in Lawsuit with LG Energy Solution

SK Innovation Battery Plant 1 and 2 in Georgia, USA [Image Source=Yonhap News]

[Asia Economy Reporter Lim Jeong-su] SK Innovation has raised approximately 250 billion KRW through the securitization of accounts receivable from Hyundai Mobis. This is the first time the company has secured liquidity by utilizing related accounts receivable since forming a battery alliance with Hyundai Motor Group. As the volume of battery supply to Hyundai Motor Group increases, it is expected that this method of fundraising will continue to grow.

According to the investment banking (IB) industry on the 29th, SK Innovation recently raised 250 billion KRW by securitizing accounts receivable under the management of Bukook Securities. The method involves transferring accounts receivable from Hyundai Mobis to a special purpose company (SPC) established by Bukook Securities, then issuing asset-backed securities based on these receivables.

The accounts receivable transferred by SK Innovation to the SPC will be collected by the SPC over three months from July to September. Hyundai Mobis purchases batteries from SK Innovation on credit and agrees to settle the payment during this period. The collected funds are then paid to the investors of the asset-backed securities through the SPC.

SK Innovation’s fundraising through this method is interpreted as a measure to reduce temporary operational cash flow burdens. The company aims to accelerate the cash conversion of future receivables to proactively secure liquidity. This also has the effect of increasing cash holdings ahead of the submission of the semi-annual report for the first half of the year.

SK Innovation produces and supplies electric vehicle batteries to Hyundai Mobis and Germany’s Daimler AG. Due to the battery alliance with Hyundai Motor Group, the battery sales proportion, which was less than 1% of total sales (based on consolidated affiliates including SK Energy), has recently risen to 5-6%.

As of the first quarter of this year, the battery business unit’s sales amounted to 560 billion KRW, accounting for 6% of total sales. The increase in battery sales to Hyundai Motor Group and the contraction of the petroleum business due to falling oil prices have simultaneously contributed to the rise in the battery sales ratio.

SK Innovation is expected to continue raising funds using accounts receivable from Hyundai Motor Group. An IB industry official forecasted, "As battery sales increase through the battery alliance with Hyundai Motor Group, the frequency and scale of accounts receivable securitization to manage operational cash flow burdens will continue to grow."

The lawsuit settlement payment to LG Energy Solution is also a factor increasing SK Innovation’s cash burden. The total settlement amount SK Innovation agreed to pay LG is approximately 2 trillion KRW. Of this, 1 trillion KRW will be paid in two installments of 500 billion KRW each this year and next year, and the remaining 1 trillion KRW will be paid as royalties ranging from 1% to 1.75% of battery sales annually starting in 2023.

Meanwhile, SK Innovation has planned to invest about 12.46 trillion KRW in the battery and related materials industry since 2018. More than 6 trillion KRW has been invested so far, and the company plans to invest an additional 6 trillion KRW or more in the future.

This content was produced with the assistance of AI translation services.