Monday, June 30th, 2014
SEOUL, KOREA - One out of five affiliates of Korea's large business groups is in financial trouble. Of the 47 business groups with assets over 5 trillion won, the number of affiliate units whose capital has been impaired or the debt-to-equity ratio in excess of 400 percent was 279, accounting for 20 percent in total.
According to CEO Score, the website tracking Korean corporate performance, on June 29, its compilation of financial results of 1,418 business group affiliates revealed that 169 firms saw their debt-to-equity ratio surpass the 400-percent threshold and 110 had their capital impaired as of the end of 2013.
The conglomerate with the highest number of affiliates with liquidity problems was Dongbu Group. Of the 51 non-financial units, as many as 24 (47.1%) were at risk of financial insolvency. It was then followed by GS Group that had 19 financially weak units out of 78. Of the main affiliate firms, GS Engineering & Construction had a relatively high debt-to-equity ratio of 263 percent.
Other chaebol groups such as CJ Group (15), Lotte (14), Hyosung (14), Kolon (12), Taeyoung (12), SK (11), Hanwha (11), and Daesung (10) also had the financially at-risk firms in two-digit numbers.
As for group-wide debt-to-equity ratio, Hyundai Group took the No. 1 position with 540 percent, with Hanjin ranking No. 2 with 452 percent. Both groups have units that involve a large fleet of leased ships or airplanes, including Hyundai Merchant Marine and Korea Airlines.
In contrast, groups like AmorePacific (17%), KT&G (22%), Youngpoong (24%), Hankook Tire (32%), Hyundai Department Store (37%), Samsung (43%), and Taekwang (45%) had low debt-to-equity ratios below 50 percent.
Source : The Korea Economic Daily