Poor Performance and COVID-19... Corporate Credit Ratings Downgraded One After Another, 'Emergency'

[Asia Economy Reporters Hyungkwang Ko and Juyoun Oh] The credit ratings of leading domestic companies are being downgraded one after another. This is due to the negative business environment caused by the sharp deterioration in performance last year amid the economic downturn, compounded this year by the COVID-19 pandemic. There are concerns that if the COVID-19 situation prolongs, it will lead to a contraction in the Chinese economy and poor corporate performance, causing a domino effect of credit rating downgrades for companies.

According to industry sources on the 19th, Korea Ratings downgraded LG Display's unsecured bond credit rating from 'AA- (Negative)' to 'A+ (Stable)' the day before. The main reason is the worsening business conditions due to the economic slowdown. Korea Ratings judged that it would be difficult for LG Display to achieve significant improvements in profitability and financial structure in the short term.

On the 17th, global credit rating agency Standard & Poor's (S&P) downgraded KCC's credit rating from 'BBB-' to 'BB+'. Considering that investment-grade ratings are up to BBB, this effectively means a fall to speculative grade.

NICE Investors Service downgraded LG Display's credit rating from 'AA-' to 'A+' on the 10th, maintaining a 'Negative' credit outlook. On the 11th, NICE also downgraded Emart's credit rating from 'AA+' to 'AA'. On the same day, Moody's lowered LG Chem's credit rating by one notch from 'A3' to 'Baa1'. The downgrade was attributed to weak petrochemical product prices due to sluggish demand and oversupply, as well as slow profitability improvement in the battery business division.

On the 6th, Moody's downgraded SK Innovation and SK Advanced Chemical's credit ratings from 'Baa1' to 'Baa2', citing "poor performance and the economic downturn in China due to COVID-19" as reasons. This was the first time COVID-19 was directly mentioned in the credit evaluation of domestic companies.

Additionally, CJ CheilJedang, Green Cross, Korea Aerospace Industries, HDC Hyundai Development Company, CJ CGV, OCI, and others have a 'Negative' credit rating outlook, indicating that their ratings may be downgraded soon. Even companies with the highest domestic credit rating (AAA) such as SK Telecom, Hyundai and Kia Motors, Hyundai Mobis, Hyundai Steel, and SK Hynix have received a 'Negative' credit outlook from Moody's.

Professor Se-don Shin, Emeritus Professor of Economics at Sookmyung Women's University, said, "Even the U.S., which is in a boom, is experiencing a slowdown in production and investment, and the Chinese economy, on which Korea heavily depends, is clearly losing growth momentum due to the COVID-19 crisis. This is expected to continuously slow down Korea's economic growth rate," adding, "This is why major domestic companies are facing the risk of credit rating downgrades."

This content was produced with the assistance of AI translation services.