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Biz News Korea(Eng)
DSME creditor banks consider downgrading its loan rating
- Collected
- 2016.05.11
- Distributed
- 2016.05.12
- Source
- Go Direct
An unnamed high-rank Woori Bank official said on Monday that bank is reviewing to “reclassify DSME’s loans from the current normal level to precautionary.” Bank loans are classified into five categories - normal, precautionary, substandard, doubtful and estimated loss, and those below precautionary are considered non-performing debts. Banks must set aside loss reserves ahead against loans in subnormal category. Banks, however cannot act alone as the government and state-run Korea Development Bank (KDB), the shipbuilder’s main creditor, worry a lowered loan rating could worsen the company’s prospects in winning new orders.
Only one creditor bank lowered loans to DSME from normal to precautionary.
“When banks tried to reclassify STX Offshore & Shipbuilding as substandard in the past, they received administrative warning from the Financial Supervisory Service (FSS),” another creditor bank’s official said.
DSME had lacked cash required for operational activities from 2012 to 2015 while its interest coverage ratio - operating income divided by interest expenses - has remained below 1 for three straight years, which should place the company on credit scrutiny list as a candidate for workout or court receivership.
By Park Joon-hyung, Kim Hyo-sung
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]