Hyundai and Samsung also had their bond ratings cut.
cnnfn.com
is the link, the article follows:
Korea ratings in jeopardy
S&P mulls downgrades for Hyundai and
Samsung as economy weakens
November 21,1997: 1:16 p.m. ET
LONDON (Reuters) - Two of South Korea's
best-known companies felt the brunt of the country's
economic upheaval Friday when a credit rating
agency said it might cut their ratings.
Standard & Poor's said Samsung Electronics Co.
Ltd. and its related entities, and Hyundai Motor Co.
Ltd. both could see demand for their products drop
as South Korea's economy weakens.
S&P cut the outlook for Daewoo Corp.'s
corporate credit rating to negative from stable but the
rating itself was affirmed.
"The actions are based on concerns that the
weakening of the general Korean economy will
adversely affect domestic demand for electronics
products," S&P said of Samsung.
"Furthermore, turmoil in Korea's economy and
financial markets could increase funding costs and
reduce the financial flexibility of the companies," it
said.
"Because they are highly leveraged, rising
domestic interest rates will also be a financial burden
for these companies," the rating agency said.
A downgrade in a company's debt rating can
make it harder for the company to borrow because it
increases the risk premium on the debt.
Standard & Poor's said it may cut the A minus
long-term rating of Samsung and its related entities,
as well as Hyundai Motor's BBB plus long-term
credit rating, putting them on CreditWatch with
negative implications.
The BBB minus long term-corporate credit rating
of Daewoo Corp., the trading vehicle for Daewoo
Group, the fourth-largest industrial group in Korea,
was affirmed by S&P but its outlook was cut to
negative from stable.
The other big U.S. ratings agency, Moody's
Investors Service, already had cut the long-term
rating on Samsung Electronics to Baa2 from Baa1
Wednesday.
Moody's said that in addition to economic
problems in Korea, the company also faces
overcapacity in the memory segment of the
semiconductor market. A shake-out of weaker
competitors hasn't yet occurred.
S&P's rating actions came before Korea
disclosed it has asked the International Monetary
Fund for some $20 billion in loans to help it out of its
financial crisis.
Some analysts said the figure won't be enough as
a rush of short-term debts start to come due.
South Korea's troubles were caused by a string of
corporate failures that have put enormous strain on
the banking system just as the won was plunging
against the dollar. |
