This article was posted on the ChosunBiz MoneyMove (MM) site at 4:35 p.m. on Sep. 9, 2025.
Large corporations are repeatedly pursuing trillion-won scale fundraising through price return swaps (PRS). After SK Innovation's battery unit SK On raised 2 trillion won through PRS, LG CHEM is now considering a PRS secured by equity in LG Energy Solution. The scale is reported to be around 2 trillion to 3 trillion won.
PRS is considered the most attractive fundraising tool that domestic large corporations can try under current circumstances. With legislation to mandate the mandatory cancellation of treasury shares imminent, issuing exchangeable bonds (EB) backed by treasury shares could draw government scrutiny, and selling assets in undervalued markets such as petrochemicals would mean disposing of them at rock-bottom prices. The market is watching Lotte and DL Group following SK and LG. These companies are internally considering funding options, and multiple securities firms are reported to have proposed PRS.
◇ "If it weren't chaebol companies, they'd issue treasury share EBs…"
Industry sources in the investment banking (IB) sector said on the 9th that LG CHEM is considering a PRS contract based on its subsidiary LG Energy Solution's equity to raise up to 3 trillion won. Major firms such as KB Securities, NH Investment & Securities, Korea Investment & Securities and Shinhan Investment Corp. are reportedly each taking on several hundred billion won and are coordinating terms such as amounts and interest rates.
The IB sector views SK and LG's trillion-won fundraising as an inevitable sequence. They are leading firms in the two major troubled sectors of petrochemicals and batteries. An industry official said, "Hanwha Group's petrochemical business is also weak, but its shipbuilding and defense industries are so buoyant that its situation is much better."
There is also talk that large corporations have no realistic options other than PRS. An IB industry official said, "Small and medium-sized firms can issue EBs secured by treasury shares or simply sell them without worrying about optics, but large corporations, especially the top 10, would be criticized if they proactively issued EBs before a treasury share cancellation bill is even passed, so they dare not touch it," adding, "Rather than selling assets at rock-bottom prices, they are choosing PRS as a kind of 'parking' method."
◇ Lotte and DL struggling because of petrochemicals, will they turn to PRS for funding
The potential PRS contract candidates seen by the securities industry are Lotte Group and DL Group. Both groups share the commonality of facing liquidity strains as the petrochemical industry weakens.
Lotte Group is reportedly internally considering PRS, asset sales and securitization among other options. LOTTE Corporation has a treasury share ratio as high as 27%, but is not daring to issue EBs.
Lotte already has a track record of raising funds through PRS this year. After the failed IPO of logistics unit LOTTE Global Logistics, it raised about 100 billion won via PRS. Korea Investment & Securities and Samsung Securities acted as underwriters, and the rate was set in the 5% range annually.
If Lotte pursues PRS again, several scenarios are possible. For example, LOTTE Chemical could raise funds using its stakes in LOTTE Energy Materials (47% owned) or LOTTE Fine Chemical (43% owned) as underlying assets. There is also LC TITAN, a Malaysian listed company (75% owned), but overseas assets may have limited demand from securities firms because of currency hedging and tax issues.
Both LOTTE Energy Materials and LOTTE Fine Chemical have market capitalizations exceeding 1 trillion won, so monetizing 10%–15% of their equity could yield several hundred billion won in cash. Using LOTTE Corporation's stake in LOTTE Chemical (25% owned) as the underlying asset to raise funds could also be an option.
In DL Group's case, its petrochemical core affiliate Yeocheon NCC is unlisted, making it hard to use as PRS underlying asset. Methods such as valuing an unlisted company like SK On (₩48,273 per share) and revaluing it at maturity for comparison are possible, but they can spark disputes over benchmarks and have weaknesses such as limited liquidity that make share price risk management difficult. Instead, using the listed company's equity, such as DL E&C, as the underlying asset to raise funds and channel them into the chemical side could be an alternative.
☞ PRS (price return swap)
A transaction structure that allows a company to raise cash without selling the shares it holds. A securities firm provides funds and, in return, receives the returns from the underlying asset shares and fee-like interest. One advantage is that under current accounting standards it is not recognized as a liability.