Debt-stricken
Financial data provider FnGuide reported on May 7 that 400 out of the 1,009 companies listed on the KOSDAQ have debts so excessive as to pose a potential threat to their future business. One of them was in the state of full capital impairment, and 53 have partial capital impairment as of the end of last year.
Furthermore, as many as 346 KOSDAQ-listed firms have a debt ratio of at least 100 percent. They can be divided into 237 in the below-200 percent group, 64 in the below-300 percent, 22 in the below-400 percent, 13 in the below-500 percent, and nine between 500 percent and 1,000 percent.
At present, the debt ratio is not included in the reasons for delisting or administrative issue designation according to the current code of the Korea Exchange covering the KOSDAQ. Instead, KOSDAQ firms with fully impaired capital are delisted, and those whose capital impairment ratio is at least 50 percent are designated as administrative issues. This means that investors themselves have to look into the financial conditions of the companies before they collapse due to heavy debt.
“The debt ratio itself has nothing to do with delisting or administrative issue designation,” the Korea Exchange explained, adding, “However, we do provide information for investors by compelling any borrowing and debt guarantee equivalent to 10 percent or more of capital to be subject to public announcement.” The Korea Exchange delisted three companies, by reason of full capital impairment, this year alone.