Moody's, an international credit rating agency, downgraded the credit ratings of LG CHEM and LG Energy Solution by one notch each.
According to the financial investment industry on the 17th, Moody's on the 14th changed the credit ratings of LG CHEM and LG Ensol from the previous "Baa1" to "Baa2." Following December, it lowered their creditworthiness again after 11 months. Because LG CHEM holds 79.4% equity in LG Ensol, LG CHEM's financial indicators affected the ratings of both companies at the same time.
Moody's lowered the credit ratings of LG CHEM and LG Energy Solution because it expects their "consolidation basis leverage" to remain at a high level for the next year to a year and a half. It expected liabilities to increase as sluggish performance in key business institutional sectors continues.
Moody's projected that, as weakness persists in core businesses such as petrochemicals and cathode materials, LG CHEM's adjusted net liability to earnings before interest, taxes, depreciation and amortization (EBITDA) will rise from 3.3 times last year to 3.4–3.7 times this year and next. However, it kept the rating outlook at "stable."
When a credit rating is downgraded, the corporate financing environment is affected immediately. Funding expenses can increase in the corporate bond and short-term money markets, and conditions such as the spread can become unfavorable when borrowing from banks.