TEXT-S&P: Korea-based KT Corp.'s proposed samurai bonds rated 'A'
(The following statement was released by the rating agency)
Jan 08 - Standard & Poor's Ratings Services today said it had assigned its 'A' rating to Korea-based KT Corp.'s (KT; A/Negative/--) proposed senior unsecured samurai bonds. KT Corp. would use the proceeds of an offering mainly to repay maturing existing debt. The rating is subject to final documentation on the bonds.
Our ratings on KT reflect the company's strong position in Korea's telecommunications market, solid and stable generation of operating cash flow, and modest financial risk profile. At the same time, our ratings take into account intensifying competition in the mature domestic telecommunications market, uncertainty in the regulatory environment, and declining revenue from fixed-line telephony services.
The negative outlook on KT reflects our expectation that a weak operating environment in Korea's telecommunications industry will pressure KT's operating performance over the next one to two years.
We may lower the ratings if any of the following occur:
-- Operating profitability weakens materially, likely due to intense competition and regulatory pressure;
-- Debt to EBITDA after adjustments for securitization of handset receivables exceeds 2.5x on a sustained basis;
-- Debt to EBITDA excluding adjustments for securitization of handset receivables remains above 1.6x for a prolonged period; or
-- The company's growth strategy and financial policies become more aggressive than we have factored into the ratings.
On the other hand, we may revise the outlook to stable if the company posts solid revenue growth and further improves its profitability and financial risk profile on a sustainable basis.
RELATED RESEARCH AND CRITERIA
2008 Corporate Criteria: Analytical Methodology, April 15, 2008
2008 Corporate Criteria: Rating Each Issue, April 15, 2008