A report in the Korea Herald suggests that Korean steelmakers are exposed to rising debt with low cash in hand.
Unlike shipping and shipbuilding, Korea’s domestic steel companies are not facing immediate credit risks, they could be next in line to go through creditor-led restructuring if they risk defaulting on their debt.
The newspaper highlighted Dongkuk Steel which, it said, has close to 3 trillion won (US$2.6 billion) in current liabilities and assets of 1.6 trillion won, ‘including cash and cash equivalents’ of 226 billion won.
Dongkuk needs to pay back 450 billion won to bond investors by early 2017, claims the Korea Herald, but won’t be able to meet short-term debt obligations if it converts all of its current assets.
Hyundai Steel has over 5 trillion won in current liabilities, which includes 1 trillion won it must pay back to bond investors. It has current assets of 5 trillion won and 617 billion in cash.
Dongkuk bonds are graded BB while Hyundai Steel’s are AA and it is said that the latter is financially better off than the former because of this and because Hyundai is backed by Hyundai Motor and Kia Motors.
POSCO, claims the Korea Herald, has enough current assets to convert into cash to pay short-term obligations and, as such, is not facing as much credit risk as Dongkuk and Hyundai.
It is said that on-going restructuring will affect investor confidence.