Chilean mining company SQM is launching a $750 million hybrid bond issuance, marking its entry into the growing wave of emerging market debt sales. The transaction underscores the company’s capital strategy amid rising demand for lithium and strengthening investor appetite for high-quality EM debt.
- SQM is issuing a $750 million hybrid bond with a 6.25% fixed coupon.
- The bond has a 10-year maturity with a call option after five years.
- Proceeds will fund lithium capacity expansion at the Atacama Salt Flat site.
- The company’s net debt-to-EBITDA ratio was 2.4x as of Q3 2025.
- The hybrid instrument includes a contingent conversion feature based on EBITDA performance.
- The offering is part of a broader surge in EM debt issuance, exceeding $120 billion in Q1 2026.
SQM, a leading producer of lithium and potassium in Chile, is preparing to issue a $750 million hybrid bond, following a strategic move to diversify its funding sources ahead of anticipated growth in lithium output. The instrument will feature a 10-year maturity with a fixed coupon rate of 6.25% and includes a contingent conversion feature tied to the company’s EBITDA performance. This issuance will be structured as a perpetual hybrid bond with a call option after five years, allowing SQM flexibility in managing its debt profile. The timing of the offering reflects a broader trend in emerging market capital markets, where companies in commodity-rich economies are increasingly turning to hybrid instruments to access international investor pools. The $750 million size positions SQM among the top-tier EM issuers, with proceeds earmarked for expanding lithium extraction in the Atacama Salt Flat, where the company controls one of the world’s largest brine-based lithium reserves. The project is expected to increase annual lithium carbonate capacity by 25% by 2028. Investors will be closely monitoring the bond’s credit profile, particularly SQM’s leverage ratio, which stood at 2.4x net debt to EBITDA as of Q3 2025. The hybrid structure aims to balance cost of capital with investor protection, offering higher yields than traditional senior debt while maintaining a subordinate ranking in the capital structure. Credit rating agencies are expected to assign a BB+ rating to the issue, reflecting moderate risk given the company’s dominant market position in South America’s lithium sector. The bond offering comes amid a surge in EM debt issuance, with over $120 billion raised in the first quarter of 2026 across Latin America, Asia, and Eastern Europe. SQM’s entry is likely to attract institutional investors focused on resource equities and ESG-aligned infrastructure financing, particularly those targeting clean energy supply chains. Market participants note that the hybrid bond’s hybrid nature may appeal to yield-seeking funds seeking higher returns without full equity risk.