Posted on 29 Apr 2015
South Korean credit appraisers have lowered their ratings on some local builders and steelmakers grappling with weak bottom lines and worsening financial structure amid a grim business outlook, data showed Wednesday.
Korea Investors Service (KIS), the Korean affiliate of Moody's Investors Service, cut the ratings of three debt-ridden construction firms -- GS Engineering & Construction, KCC Engineering & Construction and Hansin Engineering & Construction -- by one notch.
KIS also projected a negative outlook for Samsung Engineering and SK Engineering & Construction, citing their sluggish overseas projects and lingering uncertainties in the domestic market.
Although the domestic real estate market has recently recovered on the back of low interest rates and policy hopes, the agency said local companies were not likely to have a strong turnaround this year.
"A slower-than-expected recovery in the housing market may cause supply
glut, which could add financial burden on construction companies," Kwon
Ki-kyuk, a senior researcher at KIS, said in a report. "As the real estate
market has moved up thanks to low interest rates, the recovery pace needs further
monitoring."
Steelmakers also faced rating downgrades due to feeble demand from the
construction and shipbuilding sectors and tougher competition at home and
abroad.
The credit rating of POSCO, the nation's top steelmaker, retreated from "AAA" to "AA+", largely due to its mounting debt.
Dongkuk Steel Mill's rating was reduced by two notches to "BBB" due to its snowballing debt and weak earnings. As part of efforts to reduce debt, Dongkuk last week announced plans to sell its headquarters building in Seoul for 420 billion won.
"In the wake of a protracted slump in the construction and shipbuilding industries, steelmakers are also grappling with worse earnings and financial problems," Jun Ji-hoon, a KIS researcher, said.
