SK Innovation Raises $3.4 Billion in Major Financing With Meritz

A SK On Co. battery cell for electric vehicle displayed at the InterBattery exhibition in Seoul. Photographer: SeongJoon Cho/Bloomberg Photo by SeongJoon Cho /Bloomberg

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(Bloomberg) — South Korean oil refiner SK Innovation Co. has raised 5 trillion won ($3.4 billion) through local brokerage Meritz Securities Co., completing one of the country’s largest corporate financing deals. 

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Meritz directly provided 3 trillion won of the total in a securitized transaction by creating a special purpose company to acquire convertible preferred shares issued by SK Innovation’s LNG power subsidiaries, Meritz Chief Executive Officer Kim Jongmin told Bloomberg News last week. The other 2 trillion won was also provided by Meritz through a price return swap — backed by an electric vehicle battery unit, SK On Co. — that was later sold to downstream investors, Kim added. 

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The deal is part of SK Innovation’s broader plan, announced in July, to raise 8 trillion won and reorganize its energy units, after its businesses were hit by an EV industry slowdown and supply chain disruptions. Proceeds will go toward paying off some of SK Innovation’s net debt total of 28.9 trillion won.

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SK Innovation’s securitization deal spotlights how top Korean chaebol groups are turning to creative financial structures to manage mounting debt. As the energy giant, which has junk or near-junk ratings, struggles with industry challenges and heavy leverage, the transaction underscores both the urgency and complexity of corporate financing in a tightening credit environment. Its scale and structure will test investor confidence and reveal how Korea’s industrial giants manage risk in a shifting global landscape. 

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Risk Management

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Meritz’s structure was tailored in a way that protected SK Innovation’s “management rights,” Kim said. 

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Its reliance on private placement and the swap agreement underscores SK’s financing needs amid weakened investor confidence, said Kim Pilkyu, senior research fellow at the Korea Capital Market Institute. 

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“With the complex structure, risk management will be a key factor,” he said. 

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The Meritz transactions follow other components of SK Innovation’s financing plan completed in the summer, when the company raised more than 2 trillion won through various rights offerings and issued 700 billion won in perpetual bonds, according to SK Innovation. 

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SK Innovation’s senior unsecured debt holds AA ratings from local companies, including Korea Ratings and Korea Investors Service. Globally, the company’s long-term ratings are lower — Ba1 from Moody’s and BBB- from Standard & Poor’s. 

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“SK Innovation is making efforts to improve its financial structure through capital expansion and debt repayment,” the company said in a messaged statement.

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—With assistance from Jaehyun Eom.

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