Financial companies such as main creditor banks are staying alert as the credit ratings of major corporations are falling in the wake of the spread of COVID-19. Examples of those corporations include Doosan Heavy Industries and Korean Air. The South Korean government is going to provide an emergency fund of one trillion won for the former. The latter’s business difficulties, in the meantime, are showing no signs of easing.
Korean Air’s credit rating outlook has been adjusted from Stable to Negative this month. That of Hanjin KAL, one of its subsidiaries, has been lowered, too. Likewise, Korea Investors Service adjusted its credit rating outlook for Doosan Heavy Industries to Negative last week while maintaining its BW rating at BBB.
Korea Ratings lowered the credit rating of LG Display’s non-guaranteed bond from AA- to A+ last month. In addition, NICE Investors Service lowered its credit rating and outlook for the same company.
It is pointed out that this trend can lead to liquidity problems. According to the Korea Financial Investment Association, the current enterprise-bank credit rating difference is at the highest level since the global financial crisis of 2008. Commercial papers and certificates of deposit are the main financing indicators of enterprises and banks, and the wider gap between the two rates means that enterprises’ credit risks are now much higher than those of banks.