Compound Debt
The Bank of Korea announced on Sept. 23 that Korea’s corporate debt-to-GDP ratio increased from 125.8 percent to 129.2 percent between 2013 and last year. The ratio amounted to 166.5 percent when public enterprises were taken into the calculation, covering 500,000 or so private-sector companies in general and small-scale businesses not classified as corporate bodies. In the meantime, the ratio stood at only 112.8 percent in the United States, 124.5 percent in Britain, and 97.8 percent in Germany.
The 48 non-financial and non-public business groups each with total assets of at least five trillion won and subject to the ban on inter-subsidiary cross-shareholding recorded a weighted average debt-to-asset ratio of 88.6 percent last year. However, the percentage soared to 131.3 percent when it comes to the weighted average of their consolidated debt ratios excluding inter-subsidiary transactions. Besides, 23 of them exceeded 200 percent in consolidated debt ratio and 10 out of the 23 were below 100 percent in consolidated interest coverage ratio. The number of those with a consolidated debt ratio of over 200 percent and a consolidated interest coverage ratio below 100 percent increased from two to five between 2007 and 2014.
The Dongbu and Hanjin Groups were classified as potentially insolvent groups for eight and seven years in a row, respectively. The Hyundai and Hanjin Heavy Industries Groups remained in the same category for the fourth consecutive year, too. The Hanjin Group recorded a debt ratio of 863.6 percent, while it amounted to 864.2 percent for Dongbu and 879.1 percent for Hyundai.