According to the latest data, the number of companies suffering cuts in their credit ratings reached a level similar to the Asian financial crisis last year, centered around the vulnerable shipbuilding and steel businesses.
Korea Ratings announced on Jan. 3 that the number of local firms suffering credit rating downgrades in corporate bonds in 2015 came to 61, including bankrupt companies.
The figure is about seven times the number of companies getting credit rating upgrades during the same period. Also, it nearly matches the number of companies suffering credit downgrades in 1998 amid the Asian financial crisis, which stood at 63.
In addition to those suffering credit rating downgrades, 30 companies were given negative outlooks on their future conditions last year, up from 11 in 2013 and 29 in 2014. Companies in nearly all industrial sectors suffered credit rating downgrades, including those in construction, refinery, machinery, shipping, airline and logistics.
Regarding this, experts express concerns that more companies in overall industrial sectors will suffer credit rating downgrades this year. This is because there are still global uncertainties, including a rise in U.S. interest rates and a decrease in international oil prices, and financial authorities will regulate companies in earnest.
When credit ratings get worse, companies do not issue corporate bonds and face sluggish sales. Therefore, the number of companies suffering from a lack of funds is highly likely to rapidly rise.
As the corporate bond market has frozen after the second half of last year, even the issuance scale of blue-chip corporate bonds with credit ratings of higher than “AA” plunged in the third quarter last year. Last year, the trading volume of corporate bonds in the inside and outside of the market stood at 120.23 trillion won (US$102.11 billion), down 24.7 percent, or 39.37 trillion won (US$33.43 billion) from last year.