Big firms' debt

Large South Korean firms' ability to service their debts worsened sharply in the first half of 2023 amid falling profits and soaring interest costs, a corporate tracker said Tuesday.
The interest coverage ratio for 347 out of the country's top 500 companies by sales averaged 1.16 as of end-June, down 74 percent from 4.42 a year earlier, according to the Leaders Index.
The ratio is obtained by dividing a company's operating profit by its interest expenses. A reading below 1 means the firm's operating profit cannot cover its interest expenses.
Corporations with an interest coverage ratio of less than 1 for three consecutive years are often referred to as marginal or zombie firms.
The Leaders Index attributed the plunge in their interest coverage ratio to sinking profits and high borrowing costs.
Their combined operating profit tumbled nearly 42 percent on-year to 83.3 trillion won in the first half, while their interest expenses spiked some 122 percent to 75.1 trillion won.
A total of 98 companies had an interest coverage ratio of less than 1 as of end-June, up from 47 a year earlier.
The state-run Korea Electric Power Corp. and 36 companies have had minus interest coverage ratios for two years on end.
The Korean Reinsurance Co. posted the highest interest coverage ratio of 1,810.2, followed by power plant solutions provider KEPCO KPS with 666.5 and Lotte Fine Chemicals Co. with 364.6.
Of the 21 major industries, only the shipbuilding and machinery sector saw its ratio rise to 5.2 from 1.3 over the cited period, with the remainder suffering setbacks, according to the corporate tracker. (Yonhap)
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