Hanshin Rating "Construction Companies' Credit Ratings Under Review... Restructuring Cases May Increase"

Photo by Kang Jin-hyung aymsdream@

Korea Credit Rating (KCR) announced on the 29th that it plans to review the credit ratings of major construction companies following Taeyoung Construction's application for a workout (financial restructuring process).

In a report released that day, KCR stated, "Coupled with the government's policy will, related restructuring could proceed at an earlier stage."

KCR expects that during the restructuring process, cases of government or financial sector-led restructuring, such as workouts, may increase rather than autonomous restructuring at the individual company or affiliate level.

It emphasized, "Going forward, there is a possibility that principal and interest losses on corporate bonds could occur due to swift financial sector-led restructuring in some construction companies, making it increasingly necessary to reflect various risk factors such as project financing (PF) contingent liabilities, liquidity, and unsold inventory in credit assessments."

KCR added that it will comprehensively assess creditworthiness by considering PF contingent liabilities, liquidity management, unsold inventory, and risks of uncollected construction payments, especially focusing on construction companies with weakened economic resilience.

Among the approximately 20 construction companies whose credit ratings KCR evaluates, four have a long-term credit rating outlook classified as 'negative': GS Construction (A+), Lotte Construction (A+), HDC Hyundai Development Company (A), and Shinsegae Construction (A).

These construction companies are expected to be the primary subjects of the credit rating review.

KCR further noted, "As avoidance of construction and real estate PF-related sectors intensifies within the financial market, construction companies are likely to face difficulties not only in raising new funds but also in refinancing existing borrowings or PF securitized bonds for the time being."

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