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Photo courtesy of POSCO E&C |
[Alpha Biz= Kim Jisun] South Korean credit rating agencies are voicing concerns over a possible downgrade of POSCO E&C, following a string of fatal industrial accidents at its construction sites. Trading of the company’s corporate bonds in the over-the-counter (OTC) market has also come to a standstill.
POSCO E&C, currently rated A+ (Stable) on its unsecured corporate bonds, is facing government review of potential disciplinary measures, including the revocation of its construction license, suspension of operations, and restrictions on public tenders.
On August 10, Korea Ratings stated, “We are concerned about reputational risks stemming from diminished confidence in the company’s ability to manage safety incidents, as well as the potential weakening of its fundamental order-winning competitiveness.
If financial institutions move to restrict lending to companies with repeated safety accidents, and investor sentiment deteriorates, the company’s access to capital markets could be impaired, leading to funding difficulties.” While the rating remains unchanged for now, the statement effectively signals to the market that future downgrades are possible should the company’s financial metrics deteriorate further.
Bond trading in the OTC market has largely frozen. Since July 3, there have been no transactions exceeding KRW 1 billion in daily volume, with sell quotes dominating and few buy-side executions. Only a small volume of shorter-term bonds — maturing in early March next year and totaling KRW 1.6 billion as of August 6 — has changed hands.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
