Standard & Poor's Lowers Various Korean Corp Ratings, Still Watch Negative
22 December 1997
Standard & Poor's Lowers Various Korean Corp Ratings, Still Watch Negative
TOKYO, Dec. 22 -- Standard & Poor's today lowered the
long-term ratings of Samsung Electronics Co. Ltd., Hyundai Motor Co., Hyundai
Semiconductor America Inc., and LG-Caltex Oil Corp. to double-'B' from
triple-'B'-minus. Daewoo Corp.'s long-term rating was lowered to double-'B'-
minus from triple-'B'-minus. The short-term ratings of SK Corp., Samsung
Electronics America Inc., and LG-Caltex were also lowered to 'B' from 'A-3'.
The downgrades reflect a sharp increase in the companies' financial risk as
well as the diminishing ability of the Korean government to support them. All
ratings remain on CreditWatch with negative implications.
The companies' debt service burden has increased sharply due to a rise in
domestic interest rates and a depreciation in the won, which has pushed up the
cost of foreign currency financing. This debt service burden will be
increasingly difficult to sustain as the Korean economy decelerates.
Financial obligations could also expand further if the companies are required
to rescue or meet the guarantees of other companies in their industrial groups
(chaebol).
Companies in the top chaebol are no longer immune to refinancing
difficulties. These leading groups had previously enjoyed unfettered access
to bank financing as well as an assumed promise of government support because
of their key role in the domestic economy. Given the widespread decline in
corporate credit quality and the government's weakening finances, however, the
government's ability to support the top companies has diminished
significantly.
The overall range of credit quality in the Korean corporate sector has
been compressed amid the general lack of transparency regarding the complex
intragroup relationships and finances of the chaebol. The experience of
recent months indicates that most members of a chaebol will default if a major
member is drawn into bankruptcy. Differences in the ratings reflect each
company's degree of leverage and vulnerability to low liquidity.
The companies remain on CreditWatch with negative implications, reflecting
concerns about the effective implementation of the International Monetary
Fund's restructuring plan and the waning confidence of international
investors, Standard & Poor's said. --CreditWire
RATINGS DOWNGRADED, REMAIN ON CREDITWATCH WITH NEGATIVE IMPLICATIONS
Samsung Electronics Co. Ltd.
Corp credit rtg Foreign currency BB/Watch Neg/-- BBB-/Watch Neg/--
Sr unscrd debt BB/Watch Neg BBB-/Watch Neg
Samsung Electronics America Inc.
Corp credit rtg --/Watch Neg/B --/Watch Neg/A-3
CP (GTD: Samsung
Electronics Co. Ltd.) B/Watch Neg A-3/Watch Neg
Samsung Austin Semiconductor LLC
Sr unsecd debt (GTD: Samsung
Electronics Co. Ltd.) BB/Watch Neg BBB-/Watch Neg
AST Research Inc.
Sr unsecd debt (GTD: Samsung
Electronics Co. Ltd.) BB/Watch Neg BBB-/Watch Neg
Hyundai Motor Co.
Corp credit rtg Foreign currency BB/Watch Neg/-- BBB-/Watch Neg/--
Sr unsecd debt BB/Watch Neg BBB-/Watch Neg
Hyundai Semiconductor America Inc.
Corp credit rtg BB/Watch Neg/-- BBB-/Watch Neg/--
Sr secd debt BB/Watch Neg BBB-/Watch Neg
LG-Caltex Oil Corp.
Corp credit rtg Foreign currency BB/Watch Neg/B BBB-/Watch Neg/A-3
Sr unsecd debt BB/Watch Neg BBB-/Watch Neg
CP B/Watch Neg A-3/Watch Neg
Daewoo Corp.
Corp credit rtg Foreign currency BB-/Watch Neg/-- BBB-/Watch Neg/--
SK Corp.
Corp credit rtg Foreign currency --/Watch Neg/B --/Watch Neg/A-3
CP B/Watch Neg A-3/Watch Neg
SOURCE Standard & Poor's CreditWire