Signs of a Global Second Wave of COVID-19... Companies Building 'Cash Breakwaters'

"COVID-19 Resurgence and Prolongation, More Serious Than Imagined"
Accelerating Cash Hoarding, Asset Sales, and Restructuring for Survival

[Asia Economy Reporters Kim Hyewon and Park Soyeon] Dongkuk Steel, a major domestic steel company, has mobilized all possible means such as issuing commercial papers (CP) and bank loans to secure additional emergency funds. Although the CP issuance interest rate was 5.5% per annum, twice as high as usual, the company had to raise urgent funds as a 'reluctant necessity.' The company's management said, "The situation caused by the novel coronavirus infection (COVID-19) is more severe than we expected. We had no choice but to secure a safety net that can last a long time," adding, "We consider it fortunate to have secured whatever we could." ▶Related article on page 3

As concerns about a 'second wave' of COVID-19 spread worldwide instead of subsiding, major domestic companies are preparing for emergency management and focusing all efforts on securing cash. They are rushing to fill their coffers despite higher interest rates than the market. Many companies are also struggling to survive through structural improvements such as asset sales and workforce restructuring.

According to the industry on the 22nd, SK Group’s major affiliates SK General Chemical and SK Incheon Petrochem plan to issue corporate bonds worth 400 billion KRW and 200 billion KRW respectively over this month and next. Earlier in April and May, SK Energy and SK Lubricants issued corporate bonds worth approximately 550 billion KRW and 300 billion KRW to repay debts and secure operating funds.

The automobile and aviation industries, hit hard by COVID-19, are actively selling assets and cutting costs. Korea GM is pushing to sell the logistics optimization center site near its Bupyeong plant, and Renault Samsung has closed some of its directly operated service centers. Korean Air has adjusted its in-flight meal and sales, aircraft maintenance (MRO), and mileage businesses, and is now considering selling its flight training center located on Yeongjong Island.

The display industry is scaling down its LCD business. LG Display plans to largely reduce domestic LCD TV panel production by the end of this year as part of LCD business restructuring, and in March, Samsung Display announced it would halt operations of its 7th and 8th generation LCD production lines at its Asan plant in Chungnam and Suzhou, China by the end of this year. LG Display is reportedly working on selling a parcel (about 92,000 square meters) including its 2nd and 3rd plants at the Gumi site, but negotiations have stalled due to a lack of suitable buyers despite efforts since the 2017 restructuring when the 2nd and 3rd plants were shut down.

In the chemical industry, LG Chem is accelerating business restructuring by recently selling its LCD polarizer business. This is to effectively exit the LCD business and focus its capabilities on future growth areas such as OLED materials and electric vehicle battery businesses.

Lee Kyungsang, head of the Economic Research Department at the Korea Chamber of Commerce and Industry, said, "The resurgence of COVID-19 is at a worrying level, and from a corporate perspective, a conservative management strategy focused on survival for at least one year is inevitable." Professor Lee Kyungmook of Seoul National University’s Business School said, "If the COVID-19 situation could end quickly, companies would endure, but such expectations are fading," adding, "There is a high possibility of further restructuring, and companies will continue to issue corporate bonds or increase borrowings to survive."

Meanwhile, COVID-19 is spreading again worldwide, including in the United States and Brazil. In the U.S., the number of new confirmed cases recently exceeded 30,000 for two consecutive days, with the total cumulative infections approaching 2.28 million. Amid the rapid increase in new infections, the White House has also acknowledged the possibility of a second wave. Peter Navarro, director of the White House Office of Trade and Manufacturing Policy, said in an interview with CNN on the same day, "The government is stockpiling various protective equipment and ventilators in preparation for problems that may arise in the fall." Local media unanimously reported that Navarro’s remarks indicate the U.S. government is considering a second wave of COVID-19. Navarro later stated, "I will not say there will be a second wave," but added, "We are preparing cautiously. It is not contradictory."

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