Credit Rating Downgrades Loom for South Korean Companies

As the regular rating review period concludes, analysts anticipate credit rating adjustments for several South Korean firms, particularly in underperforming sectors like petrochemicals, secondary batteries, and construction. This comes after a first half that saw upgrades for companies in more favorable conditions, such as defense and air transportation, highlighting an intensifying industry polarization.

Sectors Under Scrutiny

Notable companies facing outlook downgrades include LG Chem, Hanwha TotalEnergies Petrochemical, and SK geo centric, with Lotte Engineering & Construction and Com2uS experiencing direct credit rating reductions. The construction sector, in particular, is under pressure due to concerns over real estate project financing weaknesses and a general slowdown.

Impact on Corporate Bond Issuance

The credit rating trends are directly affecting corporate bond markets. Lotte Engineering & Construction's recent attempt to raise funds through bond issuance failed to attract subscriptions, a stark contrast to the success seen by Seah Holdings. This underscores the challenges faced by the construction sector in the current economic climate.

Looking Ahead

With a majority of companies maintaining a "negative" credit outlook for over a year, the market is bracing for further downgrades in the upcoming evaluation cycle. This could exacerbate the already apparent industry polarization, affecting firms like Lotte Holdings, Netmarble, and KCC Engineering & Construction.