LG Electronics said Thursday it will issue new shares worth about 1.062 trillion won ($939 million), for the first time in six years in a sign that the company is in need of financing facility investments and other capital expenditures for next year.

The company announced that it will issue 19 million new shares priced at 55,900 won per share and list them on Jan. 9.

“The purpose of issuing new shares is to increase the competitiveness of our core businesses, such as smartphones, and secure our investment resources in a stable manner,” said an LG official.

On Thursday, shares of LG Electronics plunged 13.73 percent to close at 61,600 won ($54.58) on rumors about capital increase, which LG later confirmed and announced the plan to issue new shares at around 6:00 p.m.

Analysts say they expect the issuing of new rights will sink LG shares further as it sparks investor concerns about the company’s fiscal health in the short term.

“LG’s decision to finance their operation through capital increases will be a shock to the market, but it is a wise decision to prevent their credit ratings from further cuts,” said a credit analyst who wished to remain unidentified.

When news involving the increase of paid-in capital for LG first spread in the market, securities firms doubted the possibility, stating the time was not right for such action. But news reports that confirmed the fact came flooding in, pressuring the Korea Exchange to request for a public disclosure.

The company reported losses for a sixth consecutive quarter in the third quarter of this year. Its mobile phone division alone reported a loss of 138.8 billion won.

All three credit rating agencies has either downgraded the credit rating of LG Electronics or cut its outlook.

Moody’s cut the outlook for LG’s Baa2 issuer and senior unsecured debt rating from “stable” to “negative.” Fitch Ratings in October made the outlook cut, and Standard & Poor’s downgraded the company’s long-term corporate credit and senior unsecured debt ratings to BBB- from BBB.

By Cho Ji-hyun and Cynthia J. Kim
(sharon@heraldcorp.com)
(cynthiak@heraldcorp.com)