Stumbling Giants
Forty percent of South Korea's large business groups, or chaebol, are suffering from chronic financial troubles, with consolidated debt ratios of more than 200 percent.
According to financial and investment industries on July 19, 23 out of 48 non-financial business groups subject to antitrust watch, excluding state-run enterprises, posted a debt-equity ratio of more than 200 percent during the 2012-2014 period on a consolidated basis. Among them, the ratio of 23 chaebol hit over 200 percent for three consecutive years.
Fifteen business groups showed in 2014 higher consolidated debt ratios than 2012. The debt ratios of nine business groups, including Hyundai Group, Dongbu Group, Hanjin Group, Hanhwa Group, Hanjin Heavy Industries, and Daewoo Shipbuilding & Engineering rose more than 50 percentage points over the last two years.
In particular, Dongbu Group, the 28th-largest conglomerate with construction and non-life insurance affiliates, showed that its debt-equity ratio soared to 864.21 percent in 2014 from 397.57 percent in 2012. Hanjin and GM Korea disclosed a 185.19 percent increase and a 149.86 percent increase each. Hanhwa Group and Daewoo Construction & Engineering also showed a 92,83 percent hike and 77.88 percent increase.
The stock trading of cash-stricken Dongbu Corporation, the construction arm of Dongbu Group, has been suspended by the bourse operator since May.
The debt-equity ratio of Daewoo Shipbuilding jumped to 325.96 percent last year, up from 255.71 percent in 2012, and that of Hanjin Heavy Industries increased to 316.28 percent, up 60.15 percent during the same period.