Korea Resources Corporation Credit Rating Outlook Downgraded... Increased Uncertainty Over Integration

[Asia Economy Reporter Moon Chaeseok] Even international credit rating agencies have raised doubts about the possibility of integrating Korea Resources Corporation and Korea Mine Reclamation Corporation, lowering the credit rating outlook.

Moody's announced on the 21st that it had downgraded the credit rating outlook of Korea Resources Corporation from 'stable' to 'negative.'

Yoo Wanhee, Vice President and Senior Credit Officer at Moody's, stated, "We considered the delay in the passage of the bill concerning the integration of Korea Resources Corporation and Korea Mine Reclamation Corporation in the National Assembly and the resulting uncertainty," evaluating it as such.

He explained, "The Korean government has a strong will to integrate the two institutions, but it is uncertain whether the bill will pass in the National Assembly within 12 months. If the delay continues for a long time, it will not only negatively affect the possibility of improving the weak financial soundness of Korea Resources Corporation but also raise concerns about the timeliness of government support."

He added, "Considering the low likelihood that the government would tolerate the risks expected if Korea Resources Corporation fails to fulfill its debt obligations, and the government's strict management and supervision, the possibility of government support is very high," maintaining the corporate credit rating and unsecured bond credit rating at 'A1.'

Earlier, Representative Hong Youngpyo of the Democratic Party of Korea and others proposed the Korea Mining Corporation Act in November 2018, which aimed to merge Korea Resources Corporation and Korea Mine Reclamation Corporation to establish the 'Korea Mining Corporation.' However, the bill has not passed due to opposition from the Korea Mine Reclamation Corporation labor union and disagreements within the National Assembly.

Moreover, both institutions have shown unfavorable reactions to the integration of the corporations.

A Korea Resources Corporation official said, "Since Korea Resources Corporation has a lot of debt and even the capital increase roadmap has been abruptly cut off, the Korea Mine Reclamation Corporation would also find the integration burdensome," adding, "Within Korea Resources Corporation, there is concern that as a corporation distinctly different from a public institution, its business capabilities may not be properly demonstrated in the corporation, and there is a view that the synergy effect will not be significant."