S&P Downgrades Doosan Bobcat Outlook from Stable to Negative... Impact of COVID-19 and Parent Company's Liquidity Burden

The office of the international credit rating agency Standard & Poor's (S&P) in New York. (EPA=Yonhap News)

[Asia Economy Reporter Lim Cheol-young] Global credit rating agency Standard & Poor's (S&P) downgraded Doosan Bobcat's credit rating outlook from stable to negative on the 28th. This reflects the impact of the novel coronavirus disease (COVID-19) leading to decreased demand and concerns over Doosan Infracore's liquidity.

S&P stated, "Due to the impact of COVID-19, the construction equipment markets in the US and Europe are expected to contract significantly over the next year," adding that "Doosan Bobcat's rating for demand of small construction equipment in the US and the senior secured term loan bond rating were maintained at 'BB' and 'BBB-', respectively."

With declining performance, Doosan Bobcat's leverage ratio is also expected to rise. S&P analyzed, "Sales are projected to decrease by 10-20% this year and rebound from next year," and "EBITDA margin is expected to fall from 13% last year to 7-10% this year, causing the leverage ratio to increase from 1.6 times last year to an estimated 2.5-4.0 times."

S&P also viewed the liquidity of the parent company, Doosan Infracore, as a factor pressuring the credit rating. S&P pointed out, "Liquidity risk is increasing in relation to the group's creditworthiness, raising downward pressure on credit ratings," and "If Doosan Infracore's liquidity weakens, the group's credit rating will decline, which could also lead to a downgrade of Doosan Bobcat's credit rating."

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