Risky Listed Companies
Twelve percent of the companies listed on the Korean stock market have been in chronic insolvency for three consecutive years.
Korea Institute of Finance senior researcher Lee Ji-eon released a report on Nov. 9 and said that 213 of the companies recorded an interest coverage ratio of 100 percent or less from 2011 to 2013. Also, 334, or 20 percent of the total, showed an interest coverage ratio of 100 percent or less for both 2012 and 2013.
The ratio had dropped to 21 percent in 2010, but began to increase in the following year to reach 28 percent in 2013. The average interest coverage ratio of the bottom 10 percent of companies fell from -112 percent to -378 percent between 2010 and last year. “Not only has the degree of insolvency of the companies in question deteriorated, but also the profitability gap has widened, as seen in the increasing degree of dispersion,” the researcher explained.
The debt structure of the companies has become worse as well. The ratio of the bottom 30 percent of companies’ debts to the overall corporate debts jumped from 7 percent to 25 percent between 2007 and last year.