S.Korea top firms' debt ratios at 6-yr high in 2008
SEOUL, April 29 (Reuters) - The average debt-to-equity ratio for top South Korean business groups jumped to its highest in six years in 2008, data showed on Wednesday, ahead of creditor banks' release next month of a month-long assessment of big companies.
Heavy borrowing, liabilities related to derivatives products and translation losses on foreign debt contributed to the sharp rise in debt, while cash assets increased by 29 percent, the Fair Trade Commission said in a statement.
The ratio for the country's 48 large business groups climbed to an average 119.9 percent at the end of 2008, its highest since 2002's 122.3 percent. That compared with 98.4 percent for 41 big conglomerates a year ago.
The number of groups being surveyed increased last year, as the agency probed groups with more than 5 trillion won ($3.71 billion) in assets. The data also excluded debt ratios for financial units.
The commission said the companies had secured more cash through borrowing or bond issues to improve liquidity in the midst of a global credit squeeze and deepening economic uncertainty.
Total debt at the 48 business groups came to 691.9 trillion won at the end of last year, compared with their cash holdings of 62 trillion won.
The five biggest conglomerates -- Samsung, KEPCO (015760.KS), Hyundai Motor (005380.KS), SK and LG -- posted the lowest gearing of 82.81 percent among the surveyed groups.
By comparison, the average ratio for those ranked between 11 and 20, including Hyundai Heavy Industries (009540.KS) and Daewoo Shipbuilding (042660.KS), stood at 203.80 percent.
Separately, the Financial Services Commission is set to release the outlines of the restructuring process for 45 large business groups this week, a senior official with the financial watchdog told Reuters on Tuesday. [ID:nSEO309213]
South Korean banks will sign agreements with some conglomerates in May to enhance their balance sheets by selling non-core assets pre-emptively before they turn sour.
Following are the debt-to-equity ratios in percentage terms of business groups ranked in terms of assets
Top 5 82.81
6-10 130.72
11-20 203.80
21-30 123.84
31-40 152.59
41-48 136.74
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average 119.88
($1=1348.9 Won)
(Reporting by Kim Yeon-hee; Editing by Jonathan Hopfner)
